Lender Can Refuse Loan Because Owner Failed to Get Estoppel Certificate from Government Tenant

An owner and a lender signed a letter agreement for a loan that required the owner to get an estoppel certificate from the building's anchor tenant, a government agency. The agreement stated what information had to be included in the estoppel certificate. The tenant was unable to get the required estoppel certificate because federal law barred the government tenant from providing the necessary information. The lender refused to close on the loan. So the owner sued the lender for violating the letter agreement.

A Texas appeals court ruled that the lender could refuse to close on the loan because the owner had failed to get the estoppel certificate from the government tenant. The court said that getting the estoppel certificate was a “condition precedent—that is, an event that had to occur before the lender was obligated to give the owner the loan. The owner's failure to get the required estoppel certificate wasn't excused by the fact that the government tenant was barred by federal law from providing the necessary information, the court added. The owner should have been aware of the federal law because it was referred to in the government tenant's lease [North Houston Intl., LLC v. PW Real Estate Investments, Inc.].