Deal Documents
Estoppel certificate
Also called: tenant estoppel, estoppel letter
An estoppel certificate is a signed statement in which a tenant confirms the basic facts of its lease — rent, term, security deposit, and whether either party is in default — for the benefit of a buyer or lender. Once signed, the tenant is generally barred from later asserting facts that contradict it.
Lenders and buyers do not take a landlord's word for what the leases say. They ask each tenant to confirm it directly, and the estoppel certificate is that confirmation.
Why signing carelessly is expensive
The word estoppel is the point: the tenant is estopped from later claiming something inconsistent with what it certified. A tenant that signs a certificate saying "Landlord is not in default" while a roof leak claim is pending has likely given up that claim against the new owner. A tenant that certifies the wrong commencement date may have moved its own expiration date.
What to verify before signing
- Rent, escalations, and the current rent step. Compare to the lease, not to the last invoice.
- The commencement and expiration dates, including whether any renewal options have already been exercised.
- Security deposit amount, including any burndown that has already occurred.
- Outstanding landlord obligations, such as an unfunded tenant improvement allowance or unfinished landlord work. If the landlord owes money or work, say so.
- Any known defaults or disputes. Silence here is the expensive part.
- Options and rights. Renewal, expansion, right of first refusal, exclusive use. If the certificate does not list them, add them.
Negotiate the estoppel clause in the lease itself
The lease clause that requires the certificate is negotiable long before any certificate is requested. Reasonable positions for a tenant: a response window of at least 10 to 15 business days rather than 5, the right to qualify statements to the tenant's actual knowledge, and deletion of any provision deeming an unreturned certificate to be automatically executed in the form the landlord sent. That deemed approval language is the provision most worth removing, and it is standard in landlord forms.
Estoppel and SNDA travel together
Estoppel requests usually arrive alongside a subordination, non-disturbance and attornment agreement. Read them as a pair. The estoppel states the facts; the SNDA governs what happens to the tenant if the lender forecloses.
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SNDA (subordination, non-disturbance and attornment)
An SNDA is a three party agreement among a tenant, its landlord, and the landlord's lender that subordinates the lease to the mortgage, promises the tenant will not be disturbed if the lender forecloses, and commits the tenant to recognize the lender or a buyer as its new landlord.
A tenant improvement allowance is a sum the landlord contributes toward building out a leased space, usually quoted in dollars per rentable square foot and paid on completion against submitted invoices.
A right of first refusal requires a landlord to offer a tenant the chance to lease adjacent space on the same terms a third party has agreed to, before signing that third party.
A burndown is a schedule under which a tenant's security deposit or letter of credit is reduced over time as the tenant demonstrates payment performance.
This page is general information, not legal advice. Review lease language with qualified counsel.