For a commercial lease to be valid, an agreement for a lease must show (1) the parties, (2) a description of the premises to be demised, (3) the commencement date and (4) duration of the term, (5) the rent, if any, and (6) all the material terms of the contract not being matters incident to the relation of landlord and tenant, including any covenants or conditions, exceptions or reservations.
The Statute of Fraudshas made it clear that a contract for land has to be in writing or there is a finding of an oral agreement confirmed with some memorandum evidencing the agreement in order for it to be enforceable at law. The Statute of Frauds applies to commercial leases. However, the law has also provided an exception to this rule, that is, if the leases, or agreements for leasesdo not exceed a term of three years, then it does not have to be in writing to be enforceable at law. It should be noted that if the lease provides for any extension or renewal of the lease beyond a three-year period in the form of options to renew or extend(whether it is exercised or not), it will also create a lease that must be in writing.
Generally, if the term of the lease exceeds three years and there is no writing evidencing the lease, the lease is unenforceable. However, if the parties start acting on the unwritten lease as landlord and tenant, the lease may be found enforceable, as it would be unfair for the party to invoke the Statute of Fraudsat a later date.
In the modern world, parties often communicate via electronic means. Given this, the law has stipulated that“a legal requirement that information or a document be in writing is satisfied by information or a document that is in electronic form if it is accessible so as to be usable for subsequent reference.”(Electronic Commerce Act) The agreement is not unenforceable only by reason of being in electronic form. In addition, a requirement that a document be signed is satisfied by an electronic signature. For example, if parties enter into a commercial lease by email and signed electronically, the lease will be found enforceable as long as the lease contains all the essential elements for it to be enforceable. The courts have found that the signature requirement is met even by the name of the bottom of an email.
To err on the side of caution, parties who intend to enter into a commercial tenancy relationship should always put the agreement in writing to avoid any future dispute or confusion. Usually, the commercial lease contains an “Entire Agreement” provision to ensure no oral representation or promise forms part of the lease. As such, it is important for the parties to document any subsequent changes in the lease. Given the amount of stake a commercial lease usually involves, it is recommended that the parties hire lawyers before entering into a commercial lease. If you need an experienced Real Estate Lawyer please get in touch with MEHDI AU LLP today.
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