What You Are Signing on an Estoppel

A lease estoppel is a short document a tenant signs during a commercial property sale that confirms specific facts about the lease. The buyer of the property relies on the estoppel to verify what the seller has represented. Once signed, the tenant is bound to the facts stated in the estoppel and cannot later claim different terms. For Macomb County tenants asked to sign an estoppel, understanding what the document says and what to check before signing protects the tenant from confirming something wrong.

Why estoppels exist. When a commercial building sells, the buyer inherits the leases in place. The buyer wants to know that the leases are what the seller said they are. Rents, terms, security deposits, and defaults all need verification. The seller’s word is not enough because the seller has every reason to present the leases in the best light. The estoppel is the tenant’s own confirmation, in writing, of the material lease terms as of a specific date.

What a typical estoppel confirms. The current lease document with specific date and any amendments. The current monthly base rent amount. The lease start and expiration dates. The security deposit amount currently held by the landlord. Any options for renewal, purchase, or expansion. Any prepaid rent or other landlord obligations. Confirmation that no defaults exist on either side. Confirmation that no side agreements or oral modifications exist outside the written lease.

What tenants should check before signing. The lease document identified is the correct current version including all amendments. The rent figure matches what the tenant is actually paying, including any temporary reductions or free rent periods. The security deposit matches what the tenant actually paid, adjusting for any prior applications or returns. The lease dates match. The options language matches. Any side agreements are disclosed or the estoppel language protects the tenant if such agreements exist.

The certification standard matters. Estoppels typically use language like ‘to the best of tenant’s knowledge’ for some items and firm confirmations for others. Facts like current rent and lease dates should be firm confirmations because the tenant can verify them from records. Absence of defaults might be to the best of knowledge because the tenant may not know every action the landlord took or failed to take. Reading the certification standard for each item matters.

What signing incorrectly costs the tenant. If a tenant confirms $8,000 monthly rent when the actual rent has been $7,500 under a temporary reduction, the tenant may find the new landlord demanding $8,000 based on the estoppel. If a tenant confirms no landlord defaults when the landlord has failed to complete required repairs, the tenant may lose leverage to demand those repairs from the new owner. Estoppels can override actual lease terms if the tenant signs incorrectly.

Time pressure is real. Buyers typically send estoppels in weeks 2 or 3 of due diligence and want them back within 10 to 14 days. Tenants who receive estoppels should read them carefully, verify the facts, and return them promptly. Waiting until the last minute or refusing to sign risks upsetting the landlord and the pending buyer, and lease provisions sometimes require reasonable cooperation on estoppels as a condition of remaining in good standing.

What tenants can request. Corrections to any facts that do not match reality. Additional protective language if the standard form does not adequately protect the tenant. Time to review with the tenant’s attorney if the lease is complex or the tenant is uncertain about specific items. Copies of the final signed estoppel for the tenant’s records.

The Michigan context. Michigan is an attorney close state, so commercial closings happen at attorney offices rather than title companies alone. Estoppels typically flow through the seller’s attorney to the buyer’s attorney as part of the closing package. Tenants who want attorney review should engage their own counsel because neither the seller’s nor buyer’s attorney represents the tenant. Michigan attorney involvement in commercial transactions is more substantial than in title company only states, which affects timeline and process.

TDG Commercial, known as top commercial real estate agent in Macomb County, guides both landlords and tenants through estoppel processes during commercial building sales across the region.