In my practice, we deal with a lot of commercial leases on a regular basis, especially long-term leases. One problem that some landlords and tenants can run into with multiple year leases is that they are unaware of Ohio’s signature and notarization requirements. Ohio Revised Code 5301.01 (the Statute of Conveyances) requires that all leases three years or longer be signed and notarized. 5301.08 exempts leases not exceeding three years from notarization requirements, so if a lease is less than three years exactly, it does not have to be notarized. However, any lease (or any other instrument conveying real property) three years or longer needs to be notarized or the lease could be held by a court to be invalid or in the alternative could be held to be a month-to-month lease. For example, in Burger v. Buck, 2008 Ohio 6061 (Ohio Ct. App., Portage County Nov. 21, 2008), the lessees argued that the lack of notarization required by 5301.01 did not invalidate the lease. The appellate court held that, because the 15-year lease agreement between the lessees and the decedent (the lessor) was not notarized as mandated by the Statute of Conveyances, the trial court properly held that the lease was invalid and a month-to-month tenancy was created. It was undisputed that the lease agreement between the parties was not acknowledged before a notary as required by 5301.01. Therefore, the lease was invalid, and, as the lease provided for a monthly rent payment, the trial court correctly concluded that the lessees’ leasehold became a month-to-month tenancy. 5301.08 exempted leases not exceeding three years from the formalities required by R.C. 5301.01. See also Delfino v. Paul Davies Chevrolet, Inc., 2 Ohio St. 2d 282 (Ohio 1965).
Parties to a lease also need to look for leases that have automatic extensions, even if the initial lease term is less than three years. Under Ohio law, a one-year lease that provides for automatic extensions is a lease for more than three years for purpose of R.C. 5301.01 and 5301.08. Zunshine v. Wallace F. Ackley Co., 2000 Ohio App. LEXIS 1302 (Ohio Ct. App., Franklin County Mar. 30, 2000).
Determining the length of a lease is not just limited to factoring in automatic extensions though. Ohio courts will also count option periods with the initial lease period in examining 5301 compliance issues. 380 East Town Assoc. v. Mangus, 1991 Ohio App. LEXIS 2924 (Ohio Ct. App., Franklin County June 20, 1991). Thus, if two parties sign a one-year lease but the lease provides for two options where tenant can renew the lease for one-year periods, then the lease will be considered a three-year lease and must be notarized and signed.
Lease modifications can also require 5301 compliance. Ohio courts have found that when a modification to a lease alters the fundamental possessory interest of the property, then the lease must comply with 5301. Translated to plain english, when the physical space of the lease premises or the duration of lease is changed, the lease parties may have to sign off on the changes and have them notarized. For example, if lease parties originally enter into a month-to-month tenancy but then later agree to change it to a term of years, the parties must ensure that the lease adheres to 5301 if the new term is longer than three years. Regency Plaza, LLC v. Morantz, 2007 Ohio 2594, P39 (Ohio Ct. App., Franklin County May 29, 2007).
In the past, 5301.01 required that leases longer than three years both be notarized and that they be signed in the presence of two witnesses. The witness requirement was changed though when House Bill 279 went into effect on February 1, 2002. The bill eliminated the requirement that two witnesses execute certain real property documents including leases and mortgages of three years or longer.