Page 11 - NBIZ JUNE 2024

What Happened limited liability company. When I first received the file, I Individual Tenants

performed research on the tenant. To my surprise, there
Stated another way, individual tenants can avoid
was no listing of his company anywhere to be found. I
personal liability by signing the lease in a corporate
wondered why he signed an amendment as a company yet
capacity as president or vice president. Make sure your
tenant identified in the lease document is the same as in
the lease was signed by him as an individual. When I filed
the signature line. A good practice in drafting a signature
the lawsuit against the individual, he answered by stating
to the that the limited liability company was responsible and not line for a tenant is first to identify your tenant. I often
him individually. He argued to the jury for two days that
encounter lease documents that fail to set out the tenant
Tenant? by the landlord, and there was an obvious mistake in the signature. This creates a fact question as to whether or not
correctly. The individual tenant should never execute the
the landlord made a mistake in drafting the lease as seen
from the amendment.
lease in any other capacity than individually. Often, I find
In this case, as usual, the amendment was prepared
that individual tenants list a corporate capacity after their
name of the tenant throughout the document and in the
the tenant is an individual or corporation.
signature line of the amendment. Mistakes normally go
against the drafter, and most lease documents are drafted
If Your Tenant is a Corporation or Limited
by landlords not tenants. Can a simple mistake in drafting
Liability Company
avoid personal liability?
If your tenant is a corporation or limited liability
In the aforementioned case, the landlord prevailed
and recovered a nice judgment against this individual.
But that may not always be the outcome. There are de-
nate the capacity of the signer and provide a corporate
fenses to this situation. However, if the mistaken identity company, then the tenant entity should properly desig-
resolution granting him/her power and authority to
of this tenant would have been caught before signing execute the lease.
that amendment, little, if any, litigation would have been The proper signature lines for tenants are as follows:
necessary to enforce the lease as amended against
the individual.
TENANT (Corporation or LLC)
Guidelines to Follow ABC Owner, Inc.,
Here are some basic guidelines to follow. If the land-
lord is entering into a lease with an individual, do not By:
allow the tenant to sign as an officer. Additionally, do not
insert the company name of the tenant in the signature Its:
block for the tenant. Commercial lease signature lines are
vital to the binding contract between landlords and ten- Date:
ants. Always double check the information provided by
the tenant. It is important that the leasing agent and/or
management team do a little research on your proposed
tenant. It is not just holding individuals liable. Always TENANT (Partnership)
check to determine if the company you are entering into ABC Ltd.,
the contract with is in fact a viable company licensed to
do business within the State of Texas. An easy check is By:
found online at: https://mycpa.cpa.state.tx.us/coa/.
The party executing the lease on behalf of the tenant Its:
has to properly identify his position with the company if
he or she wants to avoid personal liability. It is imperative Date:
that the individual sets out the title held in the company
or partnership (i.e. president, manager, director, or partner).
A commercial lease to be executed by an individual should
be signed by the individual and not a representative or TENANT (Individual)
agent. Again, do not allow the individual tenant to put John Doe
anything after his name alleging, he/she is an officer or
agent of a company. If you want individual liability, there By:
should be nothing designated after the individual’s name.
And never enter into a commercial lease with a company Date:
that is not registered to do business within the State of
Texas unless you have a full guaranty of lease to back up
the lease liability of the tenant.

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