You have prepared a typed lease for a prospective tenant and delivered the lease to the tenant for execution.
The tenant proceeds to sign the lease, but also makes a few handwritten modifications to the body of the lease. The tenant returns the signed lease with the handwritten modifications. What are your rights? What happens if you countersign the lease? What happens if you cross out the tenant’s notations? What is the legal consequence if you executed the Lease before sending it to the tenant for signature?
In addition to being a classic, first-year law school exam question, the above-situation is quite common in the commercial leasing industry. Many tenants attempt to take advantage of landlords by hand-writing modifications into leases and then signing. The logic from the tenant’s perspective is that the landlord is more likely to agree to the changes if the tenant’s signature is already affixed to the lease. In other words, the landlord may determine that the advantages of securing a tenant outweigh the disadvantages of agreeing to the tenant’s modifications.
In contractual terms, when a tenant returns a signed lease with handwritten modifications, the tenant is presenting a counteroffer to the landlord. If the landlord reviews the modifications and signs the lease, the landlord is accepting the tenant’s counteroffer. If the landlord crosses out the modifications and signs the lease, there is no meeting of the minds and thus no enforceable agreement, as the landlord has rejected the tenant’s counteroffer. If the landlord has executed the lease before sending it to the tenant, there is also no meeting of the minds.
In general, a commercial landlord should not sign a lease which contains the tenant’s handwritten modifications unless the landlord agrees to the amended terms and initials the changes. Oftentimes, handwritten modifications conflict with other provisions of the lease, rendering those provisions ambiguous and unclear. In addition, the actual modifications may be vague or unclear since they are usually not written by attorneys. This is problematic for the landlord that is attempting to enforce the lease, as most judges will construe an ambiguous lease provision in favor of the tenant.
Whenever a landlord receives a lease copy signed by a prospective tenant, it should examine each page of the lease to make sure that the tenant has not made any handwritten modifications. If the tenant has made handwritten modifications, the landlord should carefully read the modifications to assess the changes that the tenant is proposing, to determine whether the proposed changes are clear as written and to determine whether the proposed changes conflict with any other portions of the lease. The safest thing for the landlord to do is to incorporate the modifications to which it agrees into the type-written lease and return it to the prospective tenant for a signature.