Business Tenants: Beware of signing the Tenant Estoppel Certificate when your landlord sells!

By Noel H. Benedict

 

If you are a tenant with a commercial lease, it is highly likely that at some point during the lease, the landlord will sell the premises; and you will be asked by your landlord to sign a document called a Tenant Estoppel Certificate.  It has been my experience that real estate agents and leasing agents try to apply substantial pressure on a tenant to sign these documents.  I generally recommend that no tenant sign, however, without consulting an attorney, and here is why:  It is not in your best interest to sign it without understanding what can happen as a result.  My general recommendation is that a tenant not sign such a document under any circumstances, unless there is a lease provision requiring the tenant to sign it.  Even then, you need to understand what it means if you do sign.

If the tenant signs the Tenant Estoppel Certificate without negotiating or recording past problems or concerns, signing it will allow the landlord to sell the shopping center or other premises as though a tenant had no past history of any complaints or problems, and it virtually erases a tenant’s right to hold the old or the new landlord accountable for past or ongoing problems.

If The Tenant Estoppel Certificate is required and the tenant must sign it to keep his lease, then the tenant should make a written list of every landlord tenant issue that the tenant reasonably believes has arisen or has the potential to arise in the future, and the  list must be made a part of the Estoppel Certificate.            

For example, let’s say a tenant has had security problems during his lease, and he and the landlord have discussed these concerns verbally. If the landlord sells the property after the tenant has signed The Tenant Estoppel, the tenant is probably in a position that he cannot complain or take legal action about similar concerns or problems to the new landlord, even though he thought he had already covered these issues with the previous landlord.  To give another common example, consider a verbal agreement in which the landlord has agreed to let a tenant use a nonstandard sign on the premises.  The tenant has been given verbal permission to put up an expensive new sign.  Yet when the new landlord arrives, he or she says “Take it down; it’s nonstandard.”  If the tenant signed The Tenant Estoppel Certificate, he must take the signage down, regardless of any verbal agreement with the old landlord.  If there was only a verbal modification in the lease but that amendment was not listed in the Tenant Estoppel Certificate, the new landlord can require the return to the standard signage.  That is why any amendment must be written and must be a part of the Estoppel before the tenant signs it.

A savvy tenant, on the other hand, can use these Tenant Estoppel Certificates as negotiating tools to perhaps get some of the repairs or maintenance issues addressed that had not previously been addressed to the tenant’s satisfaction.  Protect yourself and have a knowledgeable attorney read the language of your lease and any other papers you sign.