Owner Beware: Make Sure Authorized Individual Signs Lease

In order for a tenant-landlord lease to be effective, it is important for the commercial property owner to make sure that its signature—and not an unauthorized property management company’s—is on that lease. The two cases below illustrate what could happen if the signature on the lease is unauthorized.

In the first case, an owner formed a management company to run a building in Ohio. When the tenant rented space, the management company—not the owner—signed the lease. The lease did not mention the owner. The tenant stopped paying rent and the owner sued for damages. An Ohio court said that the owner had no claim against the tenant for the unpaid rent. The management company had no authority to sign the lease for the owner, since the owner had never made it his agent. So, the lease was invalid and unenforceable [Guyuron v. Bergdorf, June 1994].

In the second case, also in Ohio, a leasing agent entered into a lease with a tenant. The lease did not state who the actual owner was or that the leasing agent was acting as the owner’s agent in entering into the lease. Later, the leasing agent sued the tenant, claiming that the tenant had defaulted under the lease. The court ruled that the leasing agent could not win because the lease was not enforceable. That was so, the court said, because the leasing agent was not authorized to enter into the lease on the owner’s behalf. The leasing agent argued that the owner had orally given it that authorization, but the court rejected this claim. It cited a state law that a lease had to be “signed by the party…granting it, or his agent hereunto lawfully authorized, by writing, or by act and operation of law.” Under this law, said the court, authority could not be granted orally [Guyuron-Liberman, Inc. v. Bergdorf, May 1992].