The Capacity Factor

Determining whether someone has the legal capacity to sign a lease or other agreement is not an issue that comes up often, but whenever it does, it is really important to get right.

As you probably already know, someone who has been declared mentally incompetent should not be asked to sign a lease. In that situation, a guardian should be appointed by the court (if he/she hasn’t already been appointed) and is the one who should sign the agreement in his/her capacity as guardian. 

You probably also know that a minor should not be asked to sign a lease. Some people assume that a parent can just sign on a child’s behalf. However, if you find yourself in a situation in which your company/client is looking to lease a minor’s interest, then you will need to familiarize yourself with the state laws in which the property lies. It is very likely that the minor will need to have a guardian appointed in that situation as well, even if the parent(s) are still alive. 

The reason for these requirements is that both a minor and someone who has been declared mentally incompetent are considered, under the law, as lacking the legal capacity to enter into a binding agreement. In both cases, the lessor would potentially be able to void the lease. A lease that could be made unenforceable at any time is not particularly valuable for your company/client. 

If you go out to meet with a prospective lessor and are unsure about his/her capacity to sign a lease, please bring it to your manager’s attention right away and get clear instructions as to how to proceed. It is not something you will have to deal with often, but it is quite likely that it will come up at some point in your leasing career, if it hasn’t already.