Don’t Open the Door for Disputes over Lease Corrections

Q: A lease deal I’ve been working on with a tenant has taken more time that I anticipated. I’ll be reviewing the final document soon, and I don’t want any further delays. If there’s a minor mistake in the final copy of the lease, is it safe to make a handwritten correction for the sake of moving things along?

A: No! Sometimes a clerical mistake, such as an incorrect date or a misspelled name, is made on a lease document. But if the mistake isn’t caught and corrected, it can lead to a dispute later between you and your tenant—especially if the mistake works in the tenant’s favor and it’s trying to cash in on the error. That’s why it’s important to carefully review the final document for your lease deals. And, if you catch a mistake, don’t correct it by hand and initial the correction. Instead, print a new, accurate copy to be executed.

New York Case Is a Cautionary Tale 

While a handwritten correction that has been initialed by you is valid and binding, it still can open the door for a claim by your tenant; it can argue that it relied on the original information—to its detriment—when making decisions.

That was the situation in a recent New York case, where an owner had to spend time and money on litigation concerning a handwritten correction to a lease extension that its tenant supposedly relied on. There, the owner and tenant were to sign a five-year lease extension. But shortly before it was executed, the owner discovered that the termination date was listed as being a year earlier than they had agreed upon. The owner made and initialed a handwritten correction that changed the erroneous four-year period to the intended five-year period—from 2013 to 2014. The owner and tenant signed the lease extension.

Four years after the tenant received the lease extension that included the handwritten correction, it contested the expiration date. It moved out and stopped paying rent—even though it later admitted that a four-year extension had never been requested or discussed. The tenant asked a trial court for a declaratory judgment that the extension ended after four years; the owner sued the tenant for breach of contract and asked the court for a judgment in its favor without a trial.

The trial court noted that it was undisputed that the owner made changes to the lease extension whereby it corrected the typographical error. The trial court pointed out that the tenant didn’t dispute receiving the lease extension. It also admitted that it didn’t review the executed lease extension until four years later, prior to entering into a new lease and moving out of the premises.

The trial court concluded that the lease extension is a valid, binding, and enforceable contract, and by delivering an executed copy of the lease extension to the tenant, the owner complied with the prerequisites for the lease extension to take effect. The tenant had received an executed copy of the lease extension stating that the lease extension term end date was in 2014. Thus, the tenant was unable to show that the owner promised the lease extension would end as of 2013, and that it reasonably relied, to its detriment, on a 2013 end date, said the trial court.

While the owner ultimately prevailed, it could’ve saved itself from unnecessary litigation by executing a new, accurate copy of the lease extension. Instead, it opened the door for the tenant’s claim [Roy Cosme D/B/A Arcos Communications v. Central Properties, LLC, June 2015].

Consider a Better Method

While traditional methods of executing leases and related documents—that is, ink-on-paper signatures—leave the door open for potential misunderstandings and even fraud, digital signature software is a game changer. It provides security and convenience for users—protecting both office and retail owners and tenants from the inherent flaws of traditional lease signing. For what you need to know about this method, and how you can convince your prospective tenants to use it in your deals with them, see “Use Digital Signatures to Streamline Lease Deals,” available to subscribers here.