C. The Lease

• Library: Practical Guide to Commercial Real Estate in South Carolina (SCBar) (2012 Ed.)

C. The Lease

1. The Document

Several South Carolina statutes determine the enforceability of lease agreements within the commercial lease context. The statutory provisions indicate that a tenancy for one year or a shorter period of time may be created by an oral agreement,²⁸ and that any agreement for use or occupation of real estate for more than one year is void if not in writing.²⁹ To constitute an enforceable oral lease, the parties to the agreement must have a meeting of the minds and the agreement must have contemplated the essential elements of a lease.³⁰ Moreover, the South Carolina statute of frauds requires that a lease for more than one year must be in writing and signed.³¹ The statute of frauds requires that the writing reasonably identify the subject matter of the contract, sufficiently indicate a contract has been made between the parties, and state with reasonable certainty the essential terms of the agreement.³² Of course, under South Carolina case law there are a number of exceptions to the application of the statute of frauds. For example, South Carolina courts have decree specific performance of oral agreements for acquisition of an interest in land, despite the statute of frauds, where sufficient part performance has occurred.³³

It is unnecessary that a formal document be executed to create a valid lease agreement. Instead, the question of whether a lease has been consummated turns on whether or not the parties intended to enter into a lease agreement.³⁴ Moreover, an express agreement is not necessary to create a landlord-tenant relationship as such relation may arise from the implied agreement of the parties and may be established by proof of circumstances authorizing the inference that the parties intended to assume such relation toward each other.³⁵ However, without a contract or agreement between the parties, expressed or implied, a landlord-tenant relationship cannot exist.³⁶

Additionally, South Carolina's Recording Statute provides that leases for a period of more than one year are valid to affect the rights of subsequent creditors or purchasers for valuable consideration without notice only from the day and hour of recordation.³⁷

South Carolina courts have applied the rules of construction relating to contracts when construing leases.³⁸ Generally, lease agreements in South Carolina are liberally construed so as to give effect to the intention of the parties. However, the courts have generally construed a lease more strongly against the lessor and in favor of the lessee, particularly where the lease was prepared by the lessor.³⁹

Whether the lease agreement is signed under seal can impact the statute of limitations applicable to any breach of contract action relating to the agreement. As a general rule in South Carolina, a three-year statute of limitations applies to contract actions, which includes actions based on a commercial lease.⁴⁰ However, Section 15-3-520 provides a twenty-year statute of limitations for certain actions involving "sealed instruments" as defined in Section 19-1-160.⁴¹ Therefore, if the lease agreement is construed to be a "sealed instrument," the extended twenty-year statute of limitations period will apply, rather than the application of the standard three-year statute of limitations.⁴²

2. Elements of a Valid Lease Agreement

Property law and contract law combine to determine the validity of leases because a lease is both the conveyance of real estate and a contract between a landlord and a tenant. In the commercial lease context, the essential elements of a lease are the grant of possession and exclusive use and enjoyment, definite consideration or rent, and a certain term.⁴³ When considering whether or not a landlord-tenant relationship has been formed between the parties to an agreement, South Carolina courts will look to determine if the parties agreed upon these elements.

3. Rent

a. Duty to Pay

Rent is the consideration payable for the use and enjoyment of property.⁴⁴ Generally, the lease agreement will specify the amount of rent and the time or method for payment. However, a South Carolina Code provision provides that unless otherwise agreed upon, rent shall be payable monthly at the end of each calendar month.⁴⁵ Under South Carolina common law, a tenant's obligation to pay rent to the landlord arose when the landlord provided the tenant with a legal right to possession of the property.⁴⁶ This common law rule is still in effect, but has been somewhat modified by the theory of constructive eviction, whereby a...