Negotiate Estoppel Certificate Clause in Face of Changing Economy
If you’re working with a prospective lender, buyer, or investor for your office building or shopping center, the last thing you want is a surprise tenant issue that can hold up or even kill the deal. Any party preparing to spend money will want to know that it won’t be blindsided later with tenant claims that it’ll be responsible for resolving. That’s where an estoppel certificate comes into play: The tenant must commit in writing the position it takes as to the status of its lease—that is, whether or not you and the tenant are performing your lease obligations adequately.
Don’t make the mistake of using standard form language for your estoppel certificate clause. Changes in the economy and the need for increased flexibility on the part of owners and tenants make it crucial to tailor your estoppel certificate provisions so you end up with a clause that helps, not hurts, your interests.
Although there are new and important issues for owners to consider when negotiating and drafting estoppel certificate provisions, don’t focus on them to the exclusion of standard terms that need to be tailored to your situation.
There are certain standard types of items in most estoppel certificates, but there’s always room for negotiation. Typical standard items to agree on are:
- Preparation costs for certificates;
- Frequency of providing certificates;
- Compliance period; and
- Remedies for owners.
Changes in the economy have also triggered some nonstandard estoppel certificate items to be negotiated by owners and tenants. Here are several new issues to consider:
- Consider granting mutual clauses for you and the tenant;
- Avoid giving sample certificate forms to the tenant ahead of time;
- Broaden owner-favorable language in clause; and
- Require documentation to support the tenant’s statements in certificate.
For more information about how to draft a clause that’s in your best interest, Model Language to use in your estoppel certificate clause, and reasons why you shouldn’t panic over “dirty” certificates, see “Negotiate New and Standard Terms in Estoppel Certificate Clause,” available to subscribers here.