By Edward Woodall

If you have a lease for an office, shop, restaurant, or any other commercial use, there’s a good chance your lease contains a reference to a “memorandum of lease” or maybe a “short-form lease.” Go on, check it – I’ll wait. When you signed the lease, you probably didn’t read this section carefully or consider what it meant for you and your business. Your landlord probably didn’t either. But a memorandum of lease, its contents, and which party to the lease, if any, is authorized to record them are important to ensure your lease is enforceable in the long run. In this article, I’ll explain what a memorandum of lease is, whether you should record one, and what information it needs to contain to be legally effective.

What Is a Memorandum of Lease?

A memorandum of lease, sometimes called a short-form lease, a notice of lease, or a registration of lease, does exactly what it says on the tin. It’s a condensed version of your lease, boiled down to the bare necessities. The purpose of this document is simple – memoranda of lease are prepared, signed, and recorded against the landlord in the county’s register of deeds where the leased premises are located to protect your rights as a tenant. By getting your lease in the chain of title to the property, the memorandum of lease gives notice to would-be buyers of the property that you’re there and that they’ll take title to the property subject to your lease.

Do I Need to Record a Memorandum of Lease?

As I noted above, the principal reason to record a memorandum of lease is to get your lease in the chain of title. This is important because, under North Carolina law, buyers of property aren’t bound by leases of longer than three years unless those leases have been recorded. Let me say that again: if your lease has a term longer than three years, including options to renew or extend, then you need to have a memorandum of lease recorded. Otherwise, a buyer could acquire the property and remove you from the premises, and your only recourse would be to sue your old landlord – you couldn’t get the premises back even if you won. If your lease term is three years or less, then no memorandum of lease is required – so long as you’re in clear possession of the premises, then your rights are protected. If your lease has certain other provisions, like an option to purchase the premises or an exclusive, you may also want to have those recorded.

What Information Does My Memorandum of Lease Need to Contain?

Once you’ve decided to record the memorandum of lease, you’ll need to consider what information to put in it. The law requires certain information, described below, but doesn’t limit what you’re allowed to include in the memorandum of lease.

Sometimes, people record the entire lease, but I recommend you not do that for two reasons. First, the lease likely contains a great deal of information you’d like to keep confidential, like the rent you’re paying. Second, the lease itself probably doesn’t comply with the formal requirements for document recording, like notarization – having a document prepared specifically for recording is typically better. But what should that document contain?

The law requires that the memorandum of lease contain the following information:

• The names and addresses of both parties to the lease
• A description of the premises being leased, sufficient for a third party to know where the leased premises are and what land the memorandum of lease affects
• The term of the lease, including any extensions or renewals
• A brief description of the lease itself – I recommend stating the full name of the lease and the date it was executed
• Certain other provisions, like options to purchase the premises or rights of first refusal, must also be included
• Both landlord and tenant must sign the memorandum of lease and have their signatures notarized. Previously, there was some ambiguity on this point, and you would sometimes see the memoranda of lease signed by only one party. But the General Assembly amended the law this year to require both signatures

You can also include any other rights or information in the memorandum of lease. Tenants often like to have their exclusive or prohibited uses in memoranda of lease to make other potential tenants of the property aware of them. It is often desirable to include a reference to any other restrictions on the landlord in the memorandum of lease as well, such as limitations on their ability to change the layout of a shopping center.

Where Do I Go From Here?

As you can see, a memorandum of lease can go a long way toward protecting your rights as a tenant. Unfortunately, not every tenant is allowed to record a memorandum of lease. Many leases state that no party, or sometimes only the landlord, may record a memorandum of lease. If you think you need a memorandum of lease, check your lease and see what it says. Once you’ve determined that you’re allowed to prepare and record a memorandum of lease, you’ll also need to decide what, if any, non-necessary information to include. It can be a complicated process, and competent legal advice can be key in protecting your rights.

At Venn Law Group, we have experienced commercial real estate attorneys who can help you negotiate your lease to protect your rights as a tenant and help you prepare and record memoranda of lease. For more information, contact us here.

Edward B. Woodall is an attorney at Venn Law Group who practices corporate law and commercial real estate, including leasing, financing, taxation, business structures, and dispute resolution. He is passionate about helping business owners solve a variety of complex legal problems and has performed more than 100 hours of pro bono work. In addition to his law degree, he has a background in history and Spanish.