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Lease Sealing
by Michael Blahy

A Lessee is not obligated to complete a 15 year lease with a Lessor when the lease has not been properly sealed.

In September 2000, Amusement-Central Park Limited Partnership entered into a 15 year lease, requiring monthly payments with Nicol, Inc., for space in a shopping center. By December 2002, after a number of transactions, Fredericksburg 35 became the Lessor and The Game Place LLC. with Robert C. Lightburn as guarantor became the Lessee.

All went well in the lessor-lessee relationship until 2014, when The Game Place was not able to keep up with the rent, and vacated the space and terminated what it called “its month-month periodic tenancy.” As of the termination, The Game Place was up to date on it’s rent.

Fredericksburg 35 sued for unpaid rent and legal fees as provided in the lease. The Game Place demurred, saying that under the Statute of Conveyances, the lease was unenforceable, since the lease did not have a seal or one of the relaxed seal substitutes. The trial court overruled the demurrer, saying that the lease “me[t] the requirements of a deed” because “[t]he seventeen page Agreement of Lease exemplifies a sealed instrument as alluded to in Code 11-3 even though it is not referred to as ‘this deed’ or ‘this indenture.’” It also said that “[t]he law looks at substance not form. The subject lease could just as easily have been entitled ‘Deed of Lease’ or ‘Lease Indenture.’”

The case continued to trial and a final judgement ordered The Game Place and Lightburn to pay $68,610.44 in unpaid rent and $17,152.61 in attorney fees.

The Game Place appealed, saying “that the trial court erred as a matter of law when it enforced the 15 year lease and, instead, should have recognized that the lessor-lessee relationship could only be enforced as a month-to-month tenancy”.

Since the lease term was for 15 years, the Statute of Conveyances, which says “[n]o estate of inheritance or freehold or for a term of more than five years in lands shall be conveyed unless by deed or will” applies. Virginia law, with provisions that date back to 1705, and which was based on English Statute of Frauds of 1677, requires that the transaction be in the form of a deed.

One of the characteristics of a deed, is that it has to be a “sealed” writing. Two historical reasons justify the use of a seal.

First, “affixing a seal to a signature to a deed gives solemnity” to this uniquely important transaction. This Norman view was brought to England by William the Conqueror in 1066. The Normans, “a brave but illiterate nation”, “used the practice of sealing only, without writing their names”. As education spread, seals were still used, since they were more difficult to forge than a signature alone.

Second, “[a]t common law a sealed instrument imposed peculiar liabilities.” … One of these liabilities, though somewhat unclear in its origins, was the enforcement of sealed instruments even in the absence of bilateral consideration. “In a contract underseal, a valuable consideration is presumed from the solemnity of the instrument, as a matter of public policy and for the sake of peace, and presumed conclusively …”.

A seal was defined as “an impression upon wax or wafer, or some other tenacious substance capable of being impressed.” In 1788, the General Assembly of Virginia started enacting modifications to allow substitutions to the wax seal. It never abolished the requirement for a seal. The current additional options are:

  1. “a scroll by way of a seal”, “scroll” being defined as “a written mark; especially, a character affixed to a signature in place of a seal”

  2. an imprint or stamp “of a corporate or an official seal on paper or parchment”

  3. the use in the “body of [such] writing” of the words “‘this deed,’ or ‘this indenture,’ or other words importing a sealed instrument” or recognizing a seal

  4. a proper acknowledgement of a document clearly demonstrating an intent to convey real estate “before an officer authorized to take acknowledgments of deeds”

No seal or seal alternatives are included on the 15 year lease, thus failing to satisfy the common-law seal requirement embedded in the definition of “deed” under the Statute of Conveyances.

The Virginia Supreme Court had a few things to say about the trial court ruling:

  • Under the common law, a sealed contract means just that, a contract with a seal. The contract can be short or even cryptic, but its brevity or verbosity reveals nothing about whether it is sealed or unsealed.

  • We similarly disagree with the inference the court drew from the observation that the “lease could just as easily have been entitled ‘Deed of Lease’ or ‘Lease Indenture.’” By statute, the words “this deed” or “this indenture” must appear in the body of the instrument, see Code 11-3, not merely the title. … The relative ease with which a party can comply with a statute is hardly a basis for excusing him when he does not even comply with the minimal requirements imposed on him. If anything, the opposite is true.

  • With [t]he law looks at substance not form.” … Both the common law and statutory law create a virtual architecture of rules that necessarily draw lines. At the margins the lines may seem arbitrary. But those lines create a structure, and when viewed as a systemic whole they provide predictability and stability.

  • elevating “substance” over “form” as the ultimate jurisprudential ideal, is illusory.

  • When taken too far, the substance-over-form maxim can also sideline “the larger premise that, before any legal question can be answered, an a priori question must first be asked — who has the authority to decide.” … The seal requirement comes to us from centuries of common-law precedent. The seal substitutes come to us from the General Assembly. We have no authority to summarily dismiss either.

  • After listing numerous amendments, the General Assembly has engaged the common-law seal requirement but has never abolished it altogether for deeds governed by the Statute of Conveyances. Whether the legislature should do so is not for us to say. We ask only if the legislature already has; we answer that it has not.

  • When a lease violates the common-law seal requirement, the lease as such cannot be enforced in an action for damages by either party against the other. … does not mean that a court should wholly ignore the actual lessor-lessee relationship … Its invalidity, after all, was caused solely by creating a lease term exceeding five years …

  • it has long been settled that when the tenant enters, and occupies, the agreement regulates the terms on which the tenancy subsists, in all respects, except as to the duration of the term.

  • Once the invalid 15-year term is excised from the lease, the tenancy created is implied from “the manner in which the rent is received.” … In this case, rent was received on a monthly basis during the entirety of the lessor-lessee relationship … implies a month-to-month tenancy …

The Virginia Supreme Court concluded the trial court erred as a matter of law by enforcing the lease and ordering The Game Place and Lightburn to pay unpaid rent and attorney fees. We reverse and enter final judgment in favor of The Game Place and Lightburn.

(The Game Place, LLC v. Fredericksburg 35, LLC ( Supreme Court of Virginia, Docket:170631))

Decided: May, 2018
Published: May, 2018

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