Memorandum of Lease – what is it and why is it important to record this document?

When a tenant executes a commercial lease agreement, the tenant obtains an interest in the real property. Since the tenant is not the owner of the real property, the tenant’s interest in the real property would actually be considered to be an encumbrance. Section 5301.25 of the Ohio Revised Code provides that this lease should be recorded with the local county recorder; however, commercial leases can be quite long and recording the entire lease would be expensive. In comes Section 5301.251 of the Ohio Revised Code which permits the landlord and tenant to record what is referred to as a memorandum of lease instead of the entire lease agreement. A memorandum of lease contains the most important terms of the lease agreement – (1) the names and addresses of the landlord and tenant, (2) a description of the real property being leased, (3) the date the lease agreement was executed, (4) the term of the lease agreement, and (5) if the tenant has any right to renew the lease term. The memorandum of lease may contain additional references to terms of the lease agreement, but these listed items are required to be included in the memorandum of lease.

So, why is recording a memorandum of lease important? First, Section 5301.25 of the Ohio Revised Code states that the lease agreement or a memorandum of lease “shall be recorded” with the county recorder. So, this statute provides that the recording of the lease agreement or memorandum of lease is mandatory. Second, if the landlord and tenant do not record the lease agreement or memorandum of lease, then the lease agreement is still an enforceable agreement between the landlord and tenant. HOWEVER, this statute goes on to provide that until the lease agreement or the memorandum of lease is recorded with the county recorder, the lease agreement is ”fraudulent insofar as [the lease agreement] relates to a subsequent bona fide purchaser having, at the time, no knowledge of the existence of that [lease agreement].”

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If the real property that is being leased is sold and no memorandum of lease was ever recorded with the county recorder, what is the practical impact of not recording a memorandum of lease? The new owner of the property will not have to honor the lease agreement the tenant had with the prior landlord. Meaning, the new owner of the real property would be able to terminate the lease agreement. So, get those memorandum of leases prepared and recorded with the county recorder.

If you have any questions regarding this topic or another real property or business topic, do not hesitate to be in contact to further discuss.

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Chris Corpus

Founding Partner at Corpus Law Inc

This article does not provide legal advice or create an attorney-client relationship. If you have any questions or would like to learn more about this topic or if you have other legal questions, do not hesitate to contact Chris Corpus, Esq. of Corpus Law Inc at 216-973-2475. Copyright Christopher A. Corpus 2024.