THE LANDLORD WANTS YOU TO SIGN AN ESTOPPEL CERTIFICATE.
WHAT IS IT AND HOW SHOULD YOU RESPOND?
What is an estoppel certificate? It is a document designed to give third party critical information on the relationship between your landlord and you as a tenant. The third party is frequently a prospective purchaser of the landlord's real property containing your premises, or a lender who will be secured by an interest in that property. Typically the deal that the landlord is making requires the landlord to obtain such certificates from its tenants and present them to the third party for use in its "due diligence" review of the property.
Most retail space leases have provisions which require the tenant to prepare and sign estoppel certificates (or estoppel letters as they are sometimes called) upon the landlord's request. Typically the tenant is required to certify that as of the date of the document certain things are true, or to specify in some detail why they are not true. The things usually covered include (i) whether the tenant's lease is in full force and effect and has not been assigned, modified, supplemented or amended; (ii) whether all conditions under the lease to be performed by the landlord have been satisfied; (iii) whether any required contributions by the landlord to the tenant on account of the tenant's improvements have been received by the tenant; (iv) whether there are any existing claims, defenses or offsets which the tenant has against the enforcement of the lease by
the landlord; (v) whether any rent or related payment obligation has been paid more than one month in advance; and (vi) whether any security has been deposited with the landlord.
The tenant is usually required to state that its disclosures in the estoppel certificate may be relied upon by the specified third party or parties. That means that you could be liable to the third party if the certificate contains untrue statements. Thus unless you are absolutely sure about the things you are certifying, you should certify them only "to the best of tenant's knowledge." Leases usually require the tenant to prepare and sign the certificate within a relatively short period, and authorize the landlord to prepare and sign the certificate in the tenant's name if the tenant does not respond within the allowed time. For that reason, you want to be sure to attend to such requests in a timely manner, and to try to extend the response time when you are negotiating the lease.
With over 20 years of experience Stu Heller helps his clients make smarter business and leasing deals. His website is at www.theleasinglawyer.com and his office is located at 1325 4th Avenue, Suite 940, Seattle, Washington 98101. He can be reached at 206-623-0579, fax 206-682-7972, firstname.lastname@example.org and email@example.com. Contact him for a free initial consultation or to get his Leasing Tips emailed to you. Be sure to consult your lawyer before applying any of the above to a particular situation. © 2000 - 2006, Stuart A. Heller