Matt Wisniewski, CCIM, a commercial real estate broker with RE/MAX Commercial Group (RMAX +0.00%), has experienced the headache of tenants not wanting to turn in their estoppel certificates when he's trying to close on the sale of a property. Explaining these situations, he said, "It seems like you always have 80% of your tenants that are willing and happy to help. Then you have another 10% that are suspicious that you are trying to pull one over on them somehow, as many tenants have never seen an estoppel and as a whole, the real estate industry has done a poor job in educating them about the need for them. And then you have 10% that just ignore you completely, which really can be frustrating when you are on a deadline to close."
So how does a property owner handle tenants who won't cooperate? Wiskniewski says, "I have seen everything from threatening to sue them, even when they don't have any estoppel procedure language in the lease, to just paying the last few to drop the form off."
As big of a headache as it can be to enforce the tenant's obligation to complete the form, it's a necessary step. Tenants who think the landlord will just give up trying to collect it may be very mistaken and find themselves as a defendant in a lawsuit. If a tenant has any concerns with filling out the estoppel certificate, they should consult an attorney experienced in real estate law before simply refusing the sign.
What's in a tenant estoppel certificate?
Tenant estoppel certificates will vary depending on the type of property the tenants are occupying, and they're often more detailed when covering the terms of a commercial lease. The following are common sections found on the estoppel certificate form:
- Tenant's name.
- Tenant's contact information.
- Premises they're occupying.
- Lease start date.
- Lease end date.
- Monthly rent amount.
- Amount held as security deposit.
- Any amendments made to the lease.
- Any past-due rent owed.
- Any rent paid in advance more than 30 days.
- Any concessions the landlord has agreed to.
- Any work not completed by the landlord as required in the lease.
- Any defaults on the tenant's or landlord's part.
- Any defense the tenant claims to have for not fulfilling their obligations in the lease.