A recent Virginia Supreme Court decision, The Game Place, L.L.C. v. Fredericksburg 35, LLC, 813 S.E.2d 312 (Va. 2018), highlights the long-standing statutory requirement for using a deed of lease, affixing a corporate seal, or utilizing acceptable seal substitutes in long-term leases. In Game Place, the Supreme Court of Virginia ruled that a fifteen-year lease was unenforceable under Virginia’s Statute of Conveyances, which requires that any freehold in land for a term of more than five years, including leases, be accomplished by deed or will. The Court found that the subject lease was not in the form of a deed and the lessor-lessee relationship could therefore only be enforced as a month-to–month tenancy against the tenant. The tenant was current in their rent payments when they terminated the lease and vacated the premises; thus, the Court found the tenant had no ongoing payment obligations owed to the landlord.
The Statute of Conveyances, Va. Code § 55-2, states: “No estate of inheritance or freehold or for a term of more than five years in lands shall be conveyed unless by deed or will … .” At common law, deeds in Virginia required a wax-imprinted seal or a scroll. The Virginia legislature has statutorily recognized acceptable substitutes for a formal seal, contained in Va. Code § 11-3. The substitutes include: (1) a scroll; (2) an imprint or stamp of a corporate or official seal; (3) the use in the body of the documents of the words “this deed” or “this indenture” or other words importing a sealed instrument or recognizing a seal; and (4) a proper acknowledgement “by an officer authorized to take acknowledgements of deeds.”
Virginia Practice Tip: In light of this decision, it is clear under Virginia law that leases with a term of more than five years that do not comport with the Statute of Conveyances may be deemed unenforceable. Commercial landlords and lenders with loans secured by lease agreements should confirm that the leases comprising or securing their transactions have a formal seal or one of the alternatives available under Va. Code § 11-3. To the extent a lease for a period longer than five years lacks a seal or language importing a deed of lease as permitted by Va. Code § 11-3, the parties should consider requiring an amendment to the lease agreement, whereby landlord and tenant recognize formally that the lease is a sealed document and/or deed of lease from its effective date.