Property Disclosures in Commercial Real Estate Transactions

Everyone who has sold or purchased a residential property in Minnesota has come across the residential real property disclosure requirements. Every residence sold in Minnesota, whether in Mahtomedi, Moorhead, or Marshall, must have this disclosure.

But what about commercial property? Seemingly a commercial real estate transaction would have the same, or even more, stringent requirement as a residential transaction. Alas, it does not. Minnesota courts are "reluctant to impose a duty to disclose material facts in" deals between commercial entities. Driscoll v. Standard Hardware, Inc., 785 N.W.2 805, 813 (Minn. Ct. App. 2010) review denied (Minn. Sept. 29, 2010). Instead, the duty to disclose in a commercial transaction only arises when the seller actually states something (which then requires that what is stated is true), if the seller alone has "special knowledge" that the buyer cannot access, and the person with the information has a fiduciary capacity. Klein v. First Edina Natn'l Bank, 293 Minn. 418, 421, 196 N.W.2d 619, 622 (1972).

Keep this in mind when buying commercial real estate. And, ensure you get an extremely thorough inspection before you buy. If you are selling, your safest course of action is to remain silent and if you do speak out, speak the truth.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney. All information contained in links are the property of the linked site.

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