In Louisiana, the purchasers of an apartment complex sued their lender for fraud and other lender liability claims when the apartment complex turned out to be an unprofitable venture. The borrowers claimed that the bank fraudulently induced them to borrow the money to purchase the apartment complex by representing inflated profit margins.
In this situation, however, the borrowers had also been involved in the management of the apartment complex prior to the loan. For this reason, the Court found that the lender could not have fraudulently induced the transaction because the borrowers had first-hand knowledge of the value and condition of the property.
Tags: fraudulent loan transactions, lender liability claims, rental property value