What is a Memorandum of Lease and Why is it Important in Massachusetts?
In Massachusetts commercial real estate, understanding when and how to record lease-related documents can help protect long-term interests. One document that often comes into play for leases longer than seven years is the memorandum of lease—also known as a notice of lease. This document offers a practical way to notify third parties of a lease without disclosing the full terms.
This post provides an overview of what a memorandum of lease is, when recording is advisable under Massachusetts law, and how tenants and landlords can use it to help reduce the risk of future disputes related to lease enforceability.
What is a Memorandum (Notice) of Lease?
A memorandum of lease or notice of lease is a short-form document summarizing the essential terms of a lease agreement. Rather than recording the full lease, which may be voluminous or contain confidential business terms, the memorandum puts the public on notice of the lease’s existence without disclosing sensitive details.
Massachusetts General Laws Chapter 183, Section 4 governs the recording of leases and notices of lease. The statute provides that:
“A conveyance of an estate in fee simple, fee tail or for life, or a lease for more than seven years from the making thereof, or an assignment of rents or profits from an estate or lease, shall not be valid as against any person, except the grantor or lessor, his heirs and devisees and persons having actual notice of it, unless it… is recorded in the registry of deeds…”
In short, if a lease exceeds seven years from the date it is made, and the lease (or a notice of lease) is not recorded, it may be unenforceable against third parties—including subsequent purchasers, lenders, or foreclosing parties—who lack actual notice of the lease.
Why Recording is So Important: The Third-Party Problem
Recording a notice of lease provides constructive notice to the world that a lease exists. This is particularly important in the case of property sales or foreclosures. A new owner or lender who searches the public land records and finds no record of your lease may be considered to have acquired the property free of your rights—unless you can prove they had actual notice.
What Should a Notice of Lease Include?
According to M.G.L. c. 183, §4, the notice should include the following:
- Be executed by all parties to the lease.
- Contain the date of execution of the lease.
- Provide a description of the leased premises, matching the lease.
- State the term of the lease, including the commencement date and any rights of extension or renewal.
Best practices also recommend that the notice be:
- Notarized to ensure it can be recorded.
- Include references to material tenant rights that could impact third parties—such as rights of first refusal, purchase options, use restrictions, or exclusivity provisions.
Does My Lease Trigger the Recording Requirement?
If your lease term exceeds seven years from the date it is made, it is subject to the recording requirement. But the rule is broader than it may appear. Two common scenarios where the seven-year threshold is crossed even if the initial term is shorter:
- Automatic Renewal Clauses: If the lease automatically extends beyond seven years without the landlord’s further consent.
- Unilateral Renewal Options: If the tenant has a right to extend the lease beyond seven years and can do so without landlord approval, that too triggers the requirement.
Furthermore, if a lease originally under seven years is later amended to extend the term past the seven-year mark, a notice of lease should be recorded as of that amendment.
Tenant Protections: The Legal Safety Net of Recording
Recording a notice of lease ensures that any future buyer, lender, or other third party is deemed to have notice of the lease and its key terms. This “constructive notice” makes it legally binding on future owners, thereby preserving the tenant’s right to occupy and operate.
Best Practices for Tenants and Landlords
To avoid disputes, surprises, or the loss of lease rights, both landlords and tenants should proactively address the recording of a notice of lease during lease negotiations.
For Tenants:
- Negotiate for a clause requiring both parties to execute a notice of lease.
- Ensure timely recording in the appropriate Registry of Deeds.
- Consult legal counsel to ensure the notice meets statutory requirements.
For Landlords:
- Consider including lease provisions that:
- Limit the tenant’s ability to record unless the lease exceeds seven years or has other characteristics bringing it within the purview of M.G.L. c. 183, §4.
- Require termination of the notice upon lease expiration or early termination. Ideally, a landlord should have a tenant executed a termination of notice of lease concurrently with executing the initial notice of lease
- Provide the landlord with a power of attorney to record the executed termination of notice of lease upon the expiration or earlier termination of the lease.
These measures allow landlords to protect the record title to their property while ensuring transparency in the public record.
Conclusion
While the full lease agreement remains the foundation of the landlord-tenant relationship, recording a memorandum of lease can be a helpful tool for ensuring that lease rights are more likely to be respected by future property owners or lenders. For leases that may extend beyond seven years, recording a notice of lease can serve to avoid misunderstandings and improve the visibility of important lease terms in the public record.
Whether you’re a commercial tenant planning a long-term occupancy or a landlord entering into a long term lease, it is worth taking the time to understand the requirements of M.G.L. c. 183, §4 and to discuss appropriate steps with legal counsel. Doing so can support clearer expectations and better outcomes for all parties involved.
