ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Sunday, January 27, 2008

Material Omission?

This story from today's NY Times:

EDDIE CROWE, a 38-year-old former bar manager from Galway, Ireland, thought he had hit the jackpot.

In June 2006, after more than a year of searching for a suitable place to open a bar and restaurant, Mr. Crowe found a prime location on Second Avenue near East 93rd Street: a 1,500-square-foot space previously occupied by Hooligan’s Tavern, a dingy bar whose lease was not renewed. The site was on a busy avenue with heavy foot traffic in Yorkville, where Mr. Crowe was sure that his Irish stouts and homemade shepherd’s pie would find a loyal clientele.

Mr. Crowe happily signed a 12-year lease and sank his life savings into a $350,000 renovation. But soon after installing a 22-foot-long mahogany bar, a kitchen and flat-screen televisions, Mr. Crowe began to fear that the location for the Crowe’s Nest Bar and Restaurant, which opened last January, was not a blessing but a curse.

Sounds fantastic. Why a curse? Turns out, the NYC MTA began building the second avenue subway line. The story continues:

“I don’t want to get into detail, but from May until now it’s been very bad,” he said one recent evening as he slumped in a chair inside his nearly empty bar. “After all these renovations, suddenly I was thrown a curveball — the Second Avenue subway until 2014. If I’d known, there’s no way in hell I would have signed that lease.”Although business was steady for the first few months, April brought groundbreaking for the subway line literally outside Mr. Crowe’s front door. Soon, Second Avenue from 91st to 95th Streets was transformed into a maze of chain-link fencing and concrete barriers around a gaping hole surrounded by backhoes and dump trucks.

Some of the dozens of business owners on Second Avenue in the 90s, who had been forewarned about the project, say their income has fallen up to 35 percent because of the construction.

The thing is, Crowe was unaware of the planned subway construction when he signed the 12-year lease. His landlord, however, was presumably aware:

According to Jeremy Soffin, a spokesman for the Metropolitan Transportation Authority, that information was communicated starting in 2004, in letters to property owners, public presentations and visits to individual residences and businesses.

“We’re very straightforward,” Mr. Soffin said. “This is a huge public works project that involves certain inconveniences, and we’re doing everything we can to mitigate the inconveniences.”

Assuming the landlord was aware of the planned subway construction, and omitted to mention this fact when negotiating the lease wtih Crowe, does this constitute a material omission?

[Meredith R. Miller]

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