Maryland Commercial Lease Requirements: Recordation & Statutes

Since Maryland statehood on April 28, 1788, commercial leases have evolved into complex financial instruments that go far beyond establishing a simple landlord-tenant relationship. They must comply with the state's stringent Statute of Frauds and, critically, specific statutory recordation requirements for long-term tenancies.

1. The Statute of Frauds

Under MD Code, Real Prop. § 5-103, any leasehold estate exceeding a term of one year must be in writing and signed by the party creating the estate or their authorized agent to be enforceable. Oral commercial leases for more than one year are generally treated as tenancies at will (MD Code, Real Prop. § 5-101).

2. Leases Exceeding 7 Years: Mandatory Recordation

A key requirement of the Maryland Real Property Article (§ 3-101) is its mandate for recording long-term leases.

Pursuant to MD Code, Real Prop. § 3-101(a), no estate above seven years shall pass or take effect unless the lease is executed and recorded in the land records of the county where the property is located. Per § 3-101(c), this requirement applies to any lease where the initial term plus renewal options (which a party has the power to effect) exceeds seven (7) years.

Effect of Non-Recordation

Under MD Code, Real Prop. § 3-101(d), an unrecorded lease exceeding seven years remains valid and fully effective between the original parties, their personal representatives, and third parties with actual notice or notice via actual tenant occupancy. However, it may not be enforceable against a subsequent bona fide purchaser for value who acquires the interest without notice of the lease.

Memorandum of Lease

To protect proprietary financial terms from entering the public record, Maryland law allows landlords and tenants to record a brief "Memorandum of Lease" in lieu of the full document (MD Code, Real Prop. § 3-101(e)).

A memorandum of lease must contain at least the following information:

1. The names and addresses of the lessor and lessee;
2. A reference to the lease and its date of execution;
3. A description of the leased premises in the form contained in the lease;
4. The term of the lease, including the commencement and termination dates;
5. Details regarding any rights of extension or renewal, including the maximum period and exercise dates.

3. Common Commercial Clauses

Maryland law does not mandate specific clauses in commercial leases; instead, these are governed by the principle of freedom of contract. However, standard leases often include the following to protect the financial investments of both parties:

• Subordination, Non-Disturbance, and Attornment (SNDA): Important for the tenant. If the landlord defaults on their commercial mortgage and the bank forecloses, the SNDA guarantees the bank will not arbitrarily terminate the commercial lease and evict the tenant.
• Assignment and Subletting: Outlines whether the tenant can sell their business and assign the lease to a new owner. If a lease is silent on assignment, Maryland common law generally permits the tenant to assign the lease without landlord consent.
• Use and Exclusive Use Clauses: Limits the tenant to operating a specific type of business. In a retail strip mall, a coffee shop tenant may negotiate an "Exclusive Use" clause forbidding the landlord from leasing adjacent space to a competing café.

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