In the latest ACMA Community Blog post, Fellow and Immediate Past President Nancy R. Little describes the "far-reaching impact" of a recent Virginia Supreme Court decision that overruled a trial court and found that the formal requirements of the Statute of Conveyances must be satisfied in order for a lease of more than five years to be valid.
Little writes that the impact of the holding in Game Place includes loans supported by leases in Virginia and the potentially significant affect on the collateral for such loans. She notes that during the period in which legislative solutions are pursued, lenders should carefully review leases with five-plus year terms for their compliance with the Virginia formalities for a deed.
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This has long been the common law rule in Washington State for real property leases that could extend beyond one year. Washington Courts have determined that a lease satisfies the "deed form" requirement if the grantor (landlord) acknowledges the lease (although we get both parties to do so), and the lease includes the full legal description. Over the years, the courts have developed numerous equitable exceptions to the rule's application, particularly where one party expended substantial funds relying upon the lease's validity. Where lenders encounter a violation of this rule, we suggest having it rectified by a ratification which is incorporated as part of the lease, having it signed and acknowledged by both landlord and tenant, plus referencing and attaching the legal description to that document. This might be included in an estoppel or SNDA if need be. - Kathleen Hopkins
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