Florida Retail Leases: When – and How Many – Witnesses Do You Need?
All of us who have negotiated a complicated retail lease know the joy (and relief) you experience when the final draft goes out for execution. But unless you take the time to follow up and make sure your lease is executed properly, it may not be worth the paper it is written on. In Florida, the law is complex and worth examining – particularly in regard to the rules having to do with witnesses to commercial leases.
Florida: Witness Rules and Exceptions
In many jurisdictions, if your lease is not properly witnessed it may not be enforceable. In Florida, the general rule is that a commercial lease for a term of more than one year must be signed in the presence of two subscribing witnesses. One exception to that rule involves a corporation leasing property it owns. In that case, a commercial lease is valid if it bears the common or corporate seal and is signed by the corporation’s president, any vice president or the corporation’s chief executive officer.
According to the pertinent part of § 689.01 of the Florida Statutes, a commercial lease for a term lasting more than one year must be signed in the presence of two subscribing witnesses:
How real estate conveyed. – No estate or interest of freehold, or for a term of more than 1 year, or any uncertain interest of, in or out of any messuages, lands, tenements or hereditaments shall be created, made, granted, transferred or released in any other manner than by instrument in writing, signed in the presence of two subscribing witnesses by the party creating, making, granting, conveying, transferring or releasing such estate, interest, or term of more than 1 year, or by his agent thereunto lawfully authorized, unless by will and testament, or other testamentary appointment, duly made according to law; and no estate or interest, either of freehold, or of term of more than 1 year, or any uncertain interest of, in, to or out of any messuages, lands, tenements or hereditaments, shall be assigned or surrendered unless it be by instrument signed in the presence of two subscribing witnesses by the party so assigning or surrendering, or by his agent thereunto lawfully authorized, or by the act and operation of law.
As noted above, § 692.01 provides that “[a]ny corporation may execute instruments conveying, mortgaging, or affecting any interest in its lands by instruments sealed with the common or corporate seal and signed in its name by its president or any vice president or chief executive officer.” As such, where a lease for a corporation’s property bears the seal of the corporation and the signature of its president, vice president, or chief executive officer, the subscription of two witnesses is not necessary (but still would be prudent).
Similarly, Florida courts have found that Chapter 608, the statute governing limited liability companies, controls § 689.01 as it applies to conveyances by limited liability companies. Section 608.4235 provides that “[u]nless the articles of organization or operating agreement limit the authority of a member, any member of a member-managed company or manager of a manager-managed company may sign and deliver any instrument transferring or affecting the limited liability company’s interest in real property.”
For example, in Skylake Insurance Agency, Inc. v. NMB Plaza, LLC, 2008 WL 4224290 (Fla. 3rd DCA 2008), Florida’s Third District Court of Appeal stated explicitly that “it is only necessary that a conveyance by a limited liability company (in this case a lease) comply with Chapter 608. It is not necessary that the document contain the signatures of witnesses required under section 689.01.” Id. at 2.
Can Improperly Executed Commercial Leases Still Be Effective?
What if your retail lease has only one witness – or no witnesses? Is the lease void? Voidable? As with most legal questions, the answer is, “It depends.”
An improperly executed commercial lease still may be effective in Florida in the following instances: (1) when it has been partially performed by the payment and acceptance of rent and the tenant’s occupation of the premises; (2) when rent is tendered but not accepted, if the tenant can show that rent was tendered, the tenant is in possession of the leased space, and that the tenant has made valuable and permanent improvements or that failure to enforce the lease would make the transaction a fraud upon the tenant; or (3) when the lease has been ratified by a subsequently executed instrument.
Partial performance
As you might expect, in Florida it appears that commercial leases that are defectively witnessed are still binding if they are performed. If a landlord has accepted benefits and recognized the validity of a lease witnessed by only one person contrary to the statute, the landlord is estopped from claiming that the lease is invalid on that ground. See Gill v. Livingston, 29 So. 2d 631 (1947). Although Gill dealt with a residential lease, this rule is reflected in Poinciana Props., Ltd. v. Englander Triangle, 437 So. 2d 214 (Fla. 4th DCA 1983), which involved the renewal of a lease of commercial space. In Poinciana Props., not only were there no subscribing witnesses to the commercial lease, there was not even a formal written lease – only a commitment letter that was prepared and signed at the request of the landlord. Id. at 214.
Although the court in Poinciana Props. did not directly discuss the witness requirement for leases, it observed that under the broader requirements of Florida’s statute of frauds, a plaintiff may not ordinarily bring an action on a lease of real property for more than one year unless the lease is in writing and signed by the party to be charged. Id. at 215, citing Fla. Stat. § 725.01 (1981). However, the court recognized that an exception to the statute of frauds exists in equity if a contracting party has partially performed his or her share of the bargain. Id., quoting Crossman v. Fontainebleau Hotel Corp., 273 F.2d 720, 724 (5th Cir. 1959). The test of whether a party may prevail on a theory of part performance is whether the tenant “’has been in possession and has paid rent and the lessor has accepted it, under the terms agreed on, where such terms are clearly and definitely alleged and proven.’” Poinciana Props., Ltd., 437 So. 2d at 215, quoting Pedrick v. Vidal, 116 So. 857 (Fla. 1928).
The court in Bodden v. Carbonell, 354 So.2d 927 (Fla. 2nd DCA 1978) directly applied the rule in Gill to a commercial lease. In Bodden, the landlord sought to terminate a tenant’s possession on the basis that the agreement under which the tenant occupied the premises was a mere license rather than a lease, or, in the alternative, that the lease did not comply with § 689.01. The court disposed of this second argument in a succinct footnote, holding that “[a]lthough the lease does not comply with [§ 689.01] for lack of one witness to the five-year agreement, [landlord] is estopped by his conduct in accepting rental payments to assert this as a defense.” Id. at 929.
A tougher situation arises when the lease has been signed by both parties (but not properly witnessed), but neither party has yet performed under the lease (such as through delivery of possession, or payment of rent) or otherwise acted in reliance thereon. In such a case, it seems that either party could terminate the lease, at least until the other party performs or acts in reliance upon the lease.
Test applied when a landlord refuses to accept tendered rent
If a landlord refuses to accept tendered rent for an improperly executed commercial lease, it seems likely that Florida courts also will apply a broader test which is used in suits for specific performance of an oral contract for real estate sales. That test requires a plaintiff to establish the following elements by “clear, competent and satisfactory proof”: “(1) payment of consideration, (2) possession by the vendee, (3) installation of “valuable and permanent improvements” by him or ‘the presence of such facts as would make the transaction a fraud upon the purchaser if [the contract] were not enforced.’” Poinciana Props., Ltd., 437 So. 2d at 215. Regarding commercial leases, and presumably any lease, the first element is satisfied if the tenant tendered its rent obligation. Id. at 215-16. The second element is satisfied if the lessor provided the tenant with a key and the tenant occupied the space. Id. at 216. The third element is satisfied if the tenant “materially and justifiably changed his position in reliance on the landlord’s oral agreement” through actions such as moving into a new space, ordering non-cancellable merchandise, expending monies to improve the new location, or even abandoning existing efforts to locate another commercial site. Id.
Ratification
In addition, without distinguishing between residential and commercial leases, Florida Jurisprudence 2d provides that if a lease is defectively executed, the defect may be cured through ratification by the separate execution of a subsequent instrument recognizing the validity of a lease. Fl Jur 2d Landlord and Tenant § 37 (2008). Therefore, a lease that is voidable due to lack of attestation by witnesses may be made valid and binding through ratification. Id. Based on this premise, it also seems logical that it can be presumed that a lease for corporate property that is not properly executed under § 692.01 also may be cured through ratification.
Under Florida law, commercial leases lasting more than one year are required to be signed before two subscribing witnesses, unless the lease is for the property of a corporation, in which case no witnesses are needed if the lease bears the corporate seal and the signature of the corporation’s president, vice president, or chief executive officer. However, courts have made an exception to the requirements for proper attestation in three situations: (1) when parties have accepted the improperly attested lease and have performed under it through possession of the premises and payment of rent, (2) if a landlord refuses to accept tendered rent for an improperly executed commercial lease, but the tenant can meet the broader test used in suits for specific performance of an oral contract for real estate sales, and (3) when parties ratify the improperly executed lease by executing a subsequent instrument recognizing the validity of the lease.