An Estoppel Certificate is used in due diligence for a commercial real estate purchase. More importantly, they’re often required by the buyer’s lender.
An estoppel certificate is signed by a tenant occupying the property. The tenant provides confirmation of the terms of the lease agreement (amount of rent, security deposit, expiration date). Further, the estoppel certificate gives the tenant the opportunity to explain any claims against the landlord which may affect the buyer’s or lender’s decision to complete the proposed transaction.
Basically, it’s a document used to verify certain representations made by the seller.
Most well written lease agreements require the tenant to complete such a certificate. In some cases, a tenant can be in default of a lease if they fail to comply with an estoppel certificate.
Sell for More Advice: Don’t wait until the week before a closing to get these certificates signed. Ask the buyer’s lender if they will be required. If so, get them drafted by the buyer’s attorney and get them out to tenants for signature as soon as the buyer has waived all contingencies.
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About Beau Beach, CCIM
Beau is an elite Investment Real Estate Broker, Forbes contributor, author, investor and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Prowess IRES which specializes in selling investment real estate for the absolute highest price the market will pay…in the Milwaukee, Nashville, Chicago and South Florida markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached by phone, scheduled call or Beau@ProwessIRES.com