Over the past couple of months, we’ve spent a considerable amount of time discussing Florida’s laws as they relate to written and verbal contracts, enforceability, and breach of contract issues.
Our topics have included essential components of every Florida contract, what happens if a breach occurs, as well as common defenses to breach of contract claims.
While it is important to know Florida’s contract laws, understanding how those same laws are implemented and applied to every day issues is just as important, if not more.
Today, we pose the question: Is your commercial lease legally binding and enforceable in Florida if witness signatures are absent? This question was recently addressed by the Court of Appeals of Florida in Skylake Insurance Agency, Inc. vs. NMB Plaza, LLC.
The Skylake matter arose from a landlord/tenant dispute involving a Florida commercial developer, NMB Plaza, LLC. Skylake Insurance Agency entered into a ten year commercial lease agreement with NMB Plaza. At the time the lease was executed, NMB Plaza was in the process of constructing an office building in the Miami Beach area. According to the lease agreement, Skylake was to begin occupying the office space within 90 days of completion of the office building.
The commercial lease agreement was signed by three parties; a representative of NMB, and the president and vice president of Skylake. There were no witnesses present to sign the lease at the time of execution.
At some point prior to completion of the office building, the landlord decided to challenge the ten year lease agreement. In response, the tenant filed an action before the Florida court requesting that the landlord honor the lease or in the alternative, compensates the tenant for its alleged fraudulent actions.
The landlord relied on Florida statute § 689.01 to support its claim that the ten year lease was invalid and unenforceable because it lacked the signatures of two witnesses.
§ 689.01, Fla. Stat. does read in pertinent part:
“No estate or interest of freehold, or for a term of more than 1 year…shall be created, made, granted, transferred or released in any other manner than by instrument in writing, signed in the presence of two subscribing witnesses by the party…”
As with some statutes, there are exceptions to the rules. The tenant pointed to the last sentence of § 689.01, which reads: “Corporations may convey in accordance with the provisions of this section…” as an exception to the rule.” The tenant also asserted that because the lease was signed by a representative for NMB, it satisfied the statute of frauds as per § 725.01, Fla. Stat. (2003).
The Court’s findings:
With regards to the tenant’s assertions, the court found that since the landlord, NMB Plaza, was in fact a limited liability corporation (LLC) and not a corporation the last sentence of § 689.01 did not apply to it. However, after completing an independent review of the Florida laws, the court cited another statute that did allow for an exception – § 608.425(3), Fla. Stat. (2003), which governs the disposition of property of a LLC.
§ 608.425(3), Fla. Stat. (2003) reads in pertinent part:
“Instruments and documents providing for the acquisition, mortgage, or disposition of property of the limited liability company shall be valid and binding upon the limited liability company, if they are executed in accordance with this chapter.” § 608.425(3), Fla. Stat. (2003).
The court concluded that a commercial lease “qualifies as a ‘disposition’ of property of the limited liability company,” and that there was no question that the lease was executed by an authorized representative of NMB Plaza. Thus, the signatures of two witnesses, as required by § 689.01, was not necessary to validate the ten year commercial lease.
