tenant paying above market rent to himself

[Andrew Cornell]

I was assisting a family member who was looking to purchase a multi tenant office building as an income property. I noticed monthly rent for one tenant was about 10% higher than the others. Turns out that the owner of the building and the tenant paying the higher rent were two separate LLC's that were registered to the same person. The cap rate in the listing and marketing material was based on rental income that was artificially inflated. The broker also never informed me of this owner tenant relationship either either, I discovered it on my own.

I understand that an LLC is a separate legal entity but in this case the money is going to the same place. Is this sort of thing common? If name alone is not enough to show the relationship between owner and tenant shouldn't that be disclosed right away? To me it seems like a deceptive accounting trick. Is it even legal to not disclose to a buyer that this owner tenant relationship exists?