Virginia Passes Emergency Legislation Amending Statute of Conveyances

Posted on in Commercial Real Estate

Panic ensued in the commercial leasing world of landlords after the Virginia Supreme Court handed down its May 10, 2018, ruling in The Game Place, L.L.C. et al. v. Fredericksburg 35, LLC. The Court ruled that a 15-year lease was nothing more than a month to month tenancy because the lease was for more than 5 years and failed to state that it was a deed of lease under the Statute of Conveyances (Va. Code §55-2). Additionally, a deed must have certain defined characteristics, one of which is that it must be a "sealed" writing.

Originally, seals were wax or a similar adhesive in "common law", but the Virginia General Assembly had long ago provided more modern options, such as the use of a "scroll", an imprint or stamp, the use of the words "this deed", or a proper acknowledgment of a document clearly demonstrating an intent to convey real estate "before an officer authorized to take acknowledgments of deeds" (Va. Code §11-3).

The Game Place lease was for retail premises in a shopping center and met none of the requirements. The tenant had paid rent through the end of the month in which the tenant remained in possession of the leased premises, and the tenant simply vacated. The landlord sued for the balance of the rent and attorneys' fees in the manner allowed by the terms of the lease. The Court ruled that once the term of the lease is extracted by virtue of the failure to meet the requirements of a deed, the "tenancy created is implied from the manner in which the rent is received." In this case, rent was paid by the tenant and received by the landlord monthly, and the Court determined that the lease created a month to month tenancy, that the tenant had paid all that it owed and the landlord had no basis upon which to sue the tenant.

The Virginia General Assembly has promptly come to the rescue! House Bill 2287 and Senate Bill 1422, identical pieces of legislation, remove "for a term of more than five years" from the Statute of Conveyances, and add a saving provision to the statue for existing leases. The legislation also amends §55-57 (Form of a Lease) to remove references to "deed" in relation to leases and removes the requirement that leases be "sealed" instruments. The legislation goes on to remove the word "deed" from several other statutes related to leases.

Each of the two bills conclude with the finding that "an emergency exists and this act is in force from its passage." Passage of emergency legislation requires a two-thirds vote, but both bills were approved unanimously. House Bill 2287 was signed by the Governor on Friday, February 15, and Senate Bill 1422 was signed by the Governor yesterday, February 19, 2019, making the legislation effective immediately.

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