Reps and warranties matter when you sell out of home assets.   That’s the lesson of Landmark Infrastructure vs R.E.D. Investments.  Here are the facts.

• Landmark Infrastructure paid $902,358 for the right to receive rent under a billboard lease with a 99 year easement on property owned by R.E.D.  Paragraph 4 of the Purchase Agreement contained a representation that “[R.E.D] has not received notice of a rent reduction by the billboard tenant…or notice of any fact, condition or circumstance that would result in a rent reduction.”
• Evidence showed that at the time. the Purchase Agreementwas executed R.E.D knew or had reason to know that the tenant under the lease, Lamar Advertising had requested a rent reduction or would be requesting a rent reduction.
• Landmark sued R.E.D. claiming fraudulent misrepresentation, negligent misrepresentation and breach or contract.
• R.E.D. said that no damages should be awarded because the lease permitted Lamar Advertising to terminate for any reason with 90 days notice which meant that damages where not caused by misrepresentation.
• In 2018 a  jury and and US District Judge  in Missouri ruled in Landmark’s favor, stating “…the evidence showed that Landmark would not have entered into the lease had they known Lamar Advertising intended to request a rent reduction.”
• The courts assessed damages against R.E.D. of $381,234 for negligent misrepresentation and $156,000 for breach of contract.  The first award was for the difference between the purchase price of the lease and the value of the lease after it was renegotiated with Lamar.  the second award was for the profit that Landmark intended to make from the sale of the lease.

Billboard Insider’s take: There are two ways to sell out of home assets.  (1) As-is, where-is with warranties only as to title to the asset and authority to sell.  Most buyers will not agree to this or will demand a much reduced price.    (2)  With customary reps and warranties in which case you should read carefully and understand what information the seller is asking you to disclose.  A good out of home attorney can help you with the wording on reps and warranties to keep risks manageable.

Do you have a story relating to reps and warranties?  Email davewestburg@billboardinsider.com or use our comment box below and we’ll run a followup column.

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