It is common for a person to lease out a home or commercial building. While this is common practice, many people are still confused as to whether they need to record that lease in the registry of deeds. The short answer to that question is always going to be no when it comes to the lease being enforced. That doesn’t mean you shouldn’t record the lease with the registry of deeds though.
After all, according to a law in New Hampshire, all leases that are for 7 years or longer are to be recorded in the registry of deeds. If you have a lease that is less than 7 years, then you technically do not need to file any records.
But the answer does become tricky if there are other parties making claims against that piece of real estate.
A prime example of where things can get tricky is as follows:
A 10-year lease is signed on March 1st and never recorded on the registry of deeds. A mortgage is then recorded on March 15th. Do you know what would happen if that mortgage foreclosed? Who would be responsible? Basically, the foreclosure would cancel the lease. And the person, or company, who purchased the foreclosure would now be the person holding the title of the building.
The tenant would have no place to go, despite the fact they did nothing wrong.
Building owners are very aware of the 7-year law in New Hampshire. Therefore, they even include renewal terms in the equation when determining whether they need to record their lease in the registry of deeds. You will see almost all 5 year leases with a 5-year renewal option being recorded.
There are times when a short-form notice of lease is recorded in the registry of deeds. The short form includes the following:
- Names of parties leasing the building
- Description of the leased real estate
- Terms of the lease
- All rights of extensions or renewals
Most tenants are required to sign an agreement that their lease rights may be taken over by the lender if the owner defaults on the loan. This paperwork is often signed prior to the lender finalizing the loan for the owner. These agreements are the best option for the tenants because it ensures they won’t be asked to leave the property if it goes into foreclosure.
You won’t always see those agreements in place for tenants though. When the real estate market is strong, it does not benefit the lender to keep the tenants. However, when the real estate market is slow, the lenders are at least receiving money from the tenants if the building is going through a foreclosure.
While you are not required to record a lease in the registry of deeds if it is under 7 years in the state of New Hampshire, it is always best to do so. The recording of the lease is the only way to ensure the tenant does not get tangled up in any legal issues the owner may face in the future.
If you have any questions about recording leases, please contact my office today. We can help you determine the steps you must take, whether a lease was recorded or not.