The most important business term of just about any commercial lease is the “Base Rent” the tenant must pay. The Base Rent amount represents the essence of the economic agreement between the landlord and tenant. Accordingly, failing to specify the Base Rent may render the agreement legally invalid. This is true even if the lease provides a formula Base Rent rate but omits the information necessary to apply the rate.

Pitfall: Vague Leases May Violate ‘Statute of Frauds’

Every state has what’s called a “Statute of Frauds” requiring certain types of agreements, including leases lasting longer than one year, to be in writing and signed to be enforceable. The purpose of the law is to prevent fraud and ensure clarity. Thus, the existence of the written agreement:  

• Clearly proves that the contract was actually made by the parties; and
• Enables a third party who wasn’t involved in the agreement to ascertain all of the essential terms to which the parties agreed. 

Both of these conditions must be satisfied. Thus, a signed agreement that’s set out in writing may still be unenforceable if it omits one or more of the key provisions necessary to determine the essence of the agreement. In the context of a commercial lease, one of those essential provisions is the amount of rent a tenant must pay to the landlord.

Tenant Claims Lease that Omits Base Rent Amount Is Unenforceable 

A Wisconsin landlord recently learned this lesson the hard way. The problem began when a tenant signed a five-year lease for a warehouse at a Base Rate of $5.50 per square foot. But the lease listed neither total Base Rent amount nor the total number of square feet to be used to calculate the Base Rent. The actual language:  

Base Rent (Initial Term): $5.50 per square foot for the initial year, which will increase by two and half percent (2.5%) during the [I]nitial Term. Base Rent will be further set forth and confirmed in the Commencement Certificate, which is attached hereto as Exhibit B and is incorporated herein as though fully set forth.

After closing on its purchase of the warehouse, the landlord sent the tenant the Commencement Certificate listing the Base Rent amount. But the tenant wasn’t happy with the terms and refused to sign the certificate or take possession of the property and make rent payments. So, the landlord sued the tenant for violating the lease, claiming over $1 million in damages. The tenant claimed that the lease wasn’t legally valid under the Wisconsin Statute of Frauds because it didn’t set forth or provide sufficient information to determine the “amount of rent” owed. The court agreed and awarded the tenant summary judgment. The Wisconsin appeals court held that the lower court’s ruling was correct and refused to overturn it. 

Listing Base Rent Rate Alone Not Enough

As in most states, under the Wisconsin Statute of Frauds, a written lease must set forth the “amount of rent or other consideration” to be valid and enforceable. The lease in this case listed only the Base Rent rate of $5.50 per square foot without specifying either the total Base Rent amount or total square footage to be used in determining that total.

“Without a square footage number to which the $5.50-per-square-foot rate can be applied, the amount of Base Rent cannot be determined from the language of the Lease with reasonable certainty by a disinterested third party,” the court reasoned. Nor did the lease “contain a link to any other extrinsic evidence from which the square footage needed to calculate Base Rent could be ascertained.” So, it fell short of the Statute of Frauds requirements. 

The only good news for the landlord was that the court didn’t rule out the possibility of contract reformation, which the lower court would have to decide [MPI Wright LLC v. Goodin Co., 2025 Wisc. App. LEXIS 113, 2025 WL 424583]. 

Takeaway

The Statute of Frauds is a centuries-old law of contract that exists in some form in all 50 states. The moral of the MPI Wright case is that simply having a written lease agreement that’s signed by both the landlord and tenant isn’t enough to satisfy the Statute of Frauds. For the lease to be valid and enforceable, it must also clearly list the essential terms of the agreement, including: 

• The identities of the parties to the lease;
• A specific description of the premises being leased; 
• The commencement and agreed-to duration of the lease term; 
• The amount of rent payable during the lease term; and
• Any and all other material terms that aren’t incidental to the landlord-tenant relationship.

Failing to list a total Base Rent amount may be acceptable, provided that the lease also includes other pertinent information that a “disinterested third party” could use to calculate the total rent due. Thus, the $5.50 per square foot rate listed in the MPI Wright lease would have likely satisfied the Statute of Frauds “amount of rent” requirement had the lease also specified the total number of square feet that would be multiplied to that rate to determine the Base Rent amount the tenant would be required to pay. By failing to include this crucial piece of information, the landlord left itself vulnerable to the tenant’s Statute of Frauds challenge. Make sure the same thing doesn’t happen to you.