Beware of the Incomplete Lease Execution

By: Jay Hollander
Date: 1998

Jay Hollander, Esq. is the principal of Hollander and Company LLC, www.hollanderco.com, a New York City law firm concentrating its efforts in the protection and development of property interests relating to real property, intellectual property and commercial interests, as well as related litigation.

The content of this article is intended to provide general information relating to its subject matter. Providing it does not establish any attorney-client relationship and does not constitute legal advice. Personal advice in the context of a mutually agreed attorney-client relationship should be sought about your specific circumstances.

Article

One of the most common mistakes which we've seen committed by Lessors in commercial leases has nothing to do with the contents of the Lease itself.

After meticulously negotiating each and every clause and sub-clause of a lease, many Lessors fail to take one very important precaution which invariably comes back to haunt them. What is it? They fail to make sure that the Tenant properly executes the Lease, together with all riders and side documents.

In the last minute flurry to collect security checks and first month rent deposits, many leases, particularly those executed at sit down negotiation sessions, are often signed by the tenants without their signatures being witnessed and, worse still, without even a simple acknowledgment by a notary.

While nobody notices this much in the exultation of a lease closing, the lack of precaution attending this procedure often comes back to haunt unsuspecting Lessors several years later when a dispute arises concerning the Lease.

As every real estate litigator knows, a convenient way for a Tenant to make it more difficult for a Landlord to exercise its rights under a lease is to "lose" the Tenant's copy and force the Landlord to prove that the Landlord's copy is an authentic one.

This can only be done by "authenticating" or proving the genuineness of the Tenant's signature on the document. Absent the Tenant's stipulation or agreement that the signature belongs to him/her/it, this can become a difficult problem when the tenant no longer remembers signing the document and the Tenant did not sign the Lease in the presence of the Landlord.

This comes up most often under the most difficult of circumstances, namely, when a lease has been assigned or has been amended several times. What can be done to prevent this problem?

Actually, the ability to prove the authenticity of a lease lies in a few simple but effective steps. While the easiest thing is to make sure the Tenant signs in front of you and a trusted witness, this isn't absolutely necessary.

The standard Real Estate Board form of commercial lease, whether it be for an office, loft or store, provides for an acknowledgment of the signatory's execution of the lease contract. Make sure it is completely and properly filled out!

Secondly, and often more importantly, make sure that any substantive riders or side agreements are similarly acknowledged.

Third, as an added precaution, have all parties initial the bottom corner of each page of the Lease Agreement.

Also, try to make sure that, if the Tenant is represented by an attorney, that you obtain a letter from the attorney enclosing the lease, already signed by the Tenant. Such an attorney might be used years later to verify the lease.

Lastly, if there are any guaranties signed in connection with the Lease, make absolutely sure that they are acknowledged as well. Especially when the Tenant is a non-natural person like a corporation, partnership or limited liability entity, a provable guaranty can be a powerful weapon in the battle for enforcement of a lease.

While there are no guarantees in life, simple steps like these will go a long way in avoiding headaches down the road.

Copyright © Jay Hollander, 1998. All Rights Reserved.