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CalAttorney2
CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10238
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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I have a company (P.C corporation) who red a consultant

Customer Question

I have a company (P.C corporation) who hired a consultant for financial issues.. That person then rented and apartment on-line in the company's name without the authority or the authorization to do so. He then skipped out. We are now being sued to the lease by the apartment holders. He may the first month rent using a company check signed with an electronic signature of the president, again without authorization.
The apartment managers are saying they called our company and verified the that the offending consultant did work for us, He told the management of the apartment management that he was a VP of the company which he is not.
They claim this is a legal transaction we claim we had no knowledge of it so it is not. Who is correct?
Submitted: 9 months ago.
Category: Real Estate Law
Expert:  CalAttorney2 replied 9 months ago.

Dear Customer,

I am sorry to learn of this embezzlement and fraud issue.

The apartment complex is trying to claim that your company is liable based on the consultant's "ostensible authority" (meaning that the company acting as a "reasonably prudent third party" was entitled to rely on the statements and position of the consultant and that they are therefore entitled to hold your company liable.

They have an argument, but it isn't very strong. (Here is an overview of how this area of law works - you can use this and compare it to the details of the facts in your case to better gauge your risk: http://agency.uslegal.com/rights-duties-and-liabilities-between-principal-and-third-parties/)

At most, your company would be liable for the past due rent, but once the apartment became aware of the fraudulent acts, they can no longer claim reliance on the embezzler's statements and the damages are limited.