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Sign on the Dotted Line
by Ron Davis

Lack of a signature on a tenant’s lease document has proved costly for the owners of a Michigan shopping center.

The shopping center is Caro Plaza in the east-central Michigan town of Caro. And the tenant, Thumb Cellular, LLC, rented space there until 2008. That’s when Thumb Cellular moved from Caro Plaza after fulfilling the terms of a five-year lease agreement.

But the center’s owners objected to the move of their tenant. They argued that in 2003, Thumb Cellular had agreed to a 10-year lease of its rented space at Caro Plaza. If that is in fact the case, the tenant is obligated to a rental contract that doesn’t expire until 2013.

The tenant denied having entered into a new lease contract and at first simply ignored the claim of the center’s owners. In response, the center’s owners produced a copy of a lease that they contended was binding.

That lease document did indeed bear the signature of a representative of Thumb Cellular. And that representative duly notarized the document. Missing, however, was a signature of anyone representing Caro Plaza.

When confronted with that oversight, the owners of Caro Plaza admitted that none of its representatives remembered signing a copy of the 2003 lease. Moreover, the owners said they have no signed legal document showing that Thumb Cellular renewed its lease.

A Michigan court nevertheless allowed the owners of Caro Plaza an expanded period of time to clear up the confusion. And the owners responded by claiming to have found a fully-executed copy of the 2003 lease. The court determined, however, that the center’s owners had apparently dismantled its copy of the 2003 lease and, to reduce file volume, put the relevant parts in a file associated with the major tenant at Caro Plaza.

The court ultimately wasn’t persuaded by the newly discovered documents and ruled in favor of the tenant, explaining that the lack of a properly signed lease-renewal document proved fatal for the owners of Caro Plaza.

The center’s owners refused to concede, however, and asked the court to reconsider its decision. But the court pointed out that the owners “had not exercised due diligence” in its earlier search for the 2003 lease.

On appeal, a Michigan appellate court agreed that a lease of the type at issue “must be in writing and signed by the party whom the lease or sale is to be made.”

As for the claim that the center’s owners later discovered a fully-executed lease, the judges pointed out that “just because something ultimately is found should not necessarily mean that it should have been found earlier by exercising due diligence…. Rather, it appears that the fully-executed copy of the 2003 lease, assuming it is bona fide, was exactly where it was supposed to be all along, and nobody looked there.”

(Rutila Properties, LLC v. Thumb Cellular, LLC., 2011 WL 475198 [Mich.App.])

Decision: February 2011
Published: March 2011



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