As our society becomes more educated, more diverse, and more informed, it is important to consider the legal ramifications when deciding on documentation included in leases and more specifically, who signs the lease agreement. This applies to residential contracts for rent, commercial contracts/lease agreements, mobile home parks, mini storage, storage, mixed use and light industrial contracts. Whereas I am not a lawyer and would always recommend that you consult your legal representative, I do have some thoughts about what needs to be in place when a lease is signed.
If you are the owner of the property, then you sign as the owner. The contract is always considered to be between the lessor, who agrees to receive payment for use of property owned by him/her, and the lessee, who agrees to make the payment in return for use of the property. So what happens if you are the property manager or agent in representation of the owner? Legally, you have to have several types of documents executed to be able to sign “in place” of the owner whom you represent. First of all, make sure that the document states that you are the agent or manager acting on behalf of your client, the owner.
Furthermore, you have no legal right to sign a contract on behalf of an owner unless you have a signed and notarized power of attorney from the owner. In lieu of a power of attorney, if you have an employment contract which clearly states that you are authorized to sign on behalf of that owner or you have an agreement that clearly identifies you as the agreed upon representative of that owner you are in a better position. Most property management companies have contracts which are prepared by a licensed real estate lawyer to address this problem specifically. If you are an employee of a property management company and not a signer on that contract, be sure that one of the other types of agreements is in place or send the lease to the broker or the owner to sign. Remember that laws change from state to state so your best course of action is to consult with a knowledgeable real estate attorney.
“So why this is so important”? you ask. In the case where you need to evict a tenant, your property manager’s standing could be affected. In this instance, if the court questions your ability to stand in for the owner, you will need to be able to show a clearly written document that gives you the “standing” in court to represent the owner. Please also know that in some states, even if you do have an agreement in place giving you the right to sign on behalf of the owner, you must also be a licensed real estate broker to sign.
Here are some suggestions about how the lease should look if you are managing for an owner:
Agent Name, as Property Manager of behalf of Owner Name as client
Executed on May 31, 2013 By Company Name: Manager Name, Property Manager, on behalf of Mr. Owner/landlord
Many times an owner will live in a different state than his investment property is situated. It brings up the issue of portability of the documentation necessary for execution of a lease expeditiously. At Smart Property Systems our leases are encoded with esign so that when a lease is ready for signing it can be emailed to the lessee and the lessor for signing. It only takes minutes to complete this task and the lease is then returned into the system signed sealed and delivered. It is a good solution to this problem of who signs the lease.
Remember that the lease agreement is always between the owner of the property and the lessee. Any signature from a property manager must be notated as such and all laws of that state must be complied with or the lease could be ruled invalid. If the tenant turns out to be a problem tenant/resident, you could be in for big losses to your client, the owner*.
*Please see our articles about the importance of tenant screening in the blog archives.