Hertz is supposedly the world's second largest rental-car company, with some 1900 locations worldwide.
With that many offices, garages and other related facilities, you would think they'd have a pretty sophisticated group of real-estate professionals on their team. But a recent decision from the Appellate Division, First Department, sheds some doubt on that notion.
Apparently, in 2001, Hertz subleased a Manhattan garage from a company called Peach Parking Corporation. Before signing the sublease agreement, Hertz's representatives became aware of certain structural problems at the building but, for some reason, decided not to conduct a full-scale review.
In one e-mail, for example, Hertz's Director of Development corresponded with the company's Vice President of Real Estate and noted as follows:
I have reviewed the photos [of the property] and see structural, water intrusion and maintenance issues I could investigate. If there is no chance of adjusting our cost on this deal, or if it is in such high demand that we will take it as is, I wouldn't waste the money for detailed reviews ....
Some months later, Hertz requested that all parties to the lease (the Owner and all prior tenants) sign a document confirming that there were no defaults under that agreement. Some two years after that document was signed, Hertz received a notice from the property's owner demanding that the structural problems be corrected or the lease would be terminated and Hertz evicted from the space.
Of course, Hertz went ballistic and alleged that it was a victim of fraudulent conduct by all concerned. While the New York County Supreme Court allowed the rental-car company to assert a claim for "fraud in the inducement," on appeal, the Appellate Division, First Department, reversed.
The AD1 did not look too kindly on the fact that Hertz's people were "on notice" of the garage's structural problems prior to the sublease's signing, yet elected to proceed with the transaction without a full investigation into the building's structural integrity (or lack thereof). By turning a blind eye to the truth, the AD1 was of the opinion that Hertz was precluded from filing a fraud claim.
After that not so peachy outcome, should we be leaving the driving to Hertz?
For a copy of the Appellate Division's decision, please use this link: Peach Parking Corp. v. 346 W. 40th St., LLC.