Article

• Jurisdiction: Utah,United States
• Citation: Vol. 27 No. 6 Pg. 40
• Pages: 40
• Publication year: 2014

Article Vol. 27 No. 6 Pg. 40 Utah Bar Journal December, 2014

November, 2014

Does a Landlord have a Fiduciary Duty to a Tenant in the Build-out Scenario?

Collin R. Simonsen, J.

When a landlord leases an office space for the first time, it is not uncommon for the tenant to bear the cost of "building out" the space. In some cases, the landlord also takes upon himself the responsibility of hiring and overseeing the contractor, interior designer, architect, or others who work on the space. If the cost of building out the office space is not a "fixed" cost, or, in other words, if the tenant is responsible for the final cost no matter what it is, then the landlord may have a fiduciary duty to keep costs within reasonable bounds.

Although courts have generally "refrained from definitively listing the instances of fiduciary relationships," some will be "implied in law due to the factual situation surrounding the involved transactions and the relationship of the parties to each other." First Sec. Bank of Utah N.A. v. Banberry Dev. Corp., 786 P.2d 1326,1332 (Utah 1990).

"Whether or not a.. .fiduciary relationship exists depends on the facts and circumstances of each individual case." Id. (citation and internal quotation marks omitted).

Whether an agency relationship exists depends upon all the facts and circumstances of the case.... Where evidence as to the alleged agent's authority and/or principal's control is disputed or reasonable inferences drawn from the evidence may differ, the question of whether an agency relationship exists is one of fact for the jury.

United States v. Welch, 327 E3d 1081,1102 (10th Cir. 2003) (citation and internal quotation marks omitted).

Furthermore,

[a] fiduciary is [a person] in a position to...exercise.. .influence over another. A fiduciary relationship implies a condition of superiority of one of the parties over the other. Generally, in a fiduciary relationship, the property, interest or authority of the other is placed in the charge of the fiduciary.

First Sec. Bank, 782 P.2d at 1333.

When a tenant is bearing the cost of building out the tenant space, but the landlord has full control over how that is accomplished, the "authority of the [tenant] is placed in the charge of the [landlord]" to such an extent that a fiduciary duty could be found. Id.

Although no Utah court has ruled on this issue, it is a fact pattern that is closely analogous to another situation where a fiduciary or...