NYC commercial leases are complicated and typically contain many clauses and provisions that might seem mysterious. An example of a “mysterious” clause that you might see in an NYC commercial lease is the Memorandum of Lease clause. Under New York law, either the landlord or the tenant can prepare a Memorandum of Lease (“MOL”). Compared to the whole commercial Lease, a MOL is short — maybe a few pages — and typically recites the critical provisions of the Lease.
A MOL will identify, for example, the parties, the property, the part of the property subject to the Lease, the length — term — of the Lease, renewal options, etc. A MOL is prepared to be recorded in the same manner as a deed and a mortgage are recorded. Further, the purpose of a recorded MOL is to give “notice to the world” that a lease exists for a particular property on the general terms listed in the MOL.
Why is a Memorandum of Lease Important?
Typically, a Memorandum of Lease is a protection for tenants. Tenants have certain rights conferred by the Lease, including the right to possess the property. If the landlord sells the property, the new owner will take the property subject to the tenant’s right of possession. Since a MOL is a public document, any new owner will be deemed to know that the property has a tenant and will take ownership subject to those rights. The same sort of public notice applies to other parties like lenders, investors, other potential tenants, and governmental units (for purposes of eminent domain proceedings).
A Memorandum of Lease can also be important if the commercial Lease affects, or potentially affects, the rights of third parties like neighboring property owners or other tenants. These lease provisions should be included in the MOL. Examples might be the rights of ingress and egress over an easement of a neighbor’s property or some exclusive right to facilities affecting other tenants, such as exclusive parking areas or exclusive use of something like a loading dock or elevators. In this manner, the MOL notifies neighbors and other tenants of rights in the main Lease.
A MOL is essential if there is a significant period between the signing of the Lease and the tenant’s possession. During that gap, since the tenant is not physically present, it may not be apparent that the property has a tenant. Thus, a MOL provides public notice of an existing leasehold interest.
Sample Memorandum of Lease Clause
As noted, MOL clauses are often included in NYC commercial leases as boilerplate. An example of a simple clause might read like this:
“Memorandum of Lease: This Commercial Lease document shall not be recorded by either party hereto. However, at the request of either party, each agrees to execute a memorandum of Lease to be recorded at the expense of the party requesting it.”
Do I want to record a MOL?
Whether a party should have a MOL prepared and recorded depends on the circumstances. The costs of preparing and recording a MOL must be weighed against the benefits. A MOL is useful where:
- The NYC commercial lease is the long term — 10 years+
- Where the space rented is the whole or nearly the whole of the real property
- Where the value of the leasehold interest is high
- Where third parties should be on notice of exclusive tenant rights
- And more
Contact the NYC Commercial Lease Negotiators at Wright Law Firm NYC Today
Call the experienced New York commercial lease and real estate attorneys at Wright Law Firm NYC for more information. We provide top-tier commercial real estate legal and legal services for the NYC business community. To schedule a consultation, contact our office by e-mail or call us at (212) 619-1500.