He refuses to sign the lease estoppel...

6 Replies

What do you fellow property managers do when a commercial tenant refuses to sign a lease estoppel?

Recently, I've gotten a commercial tenant that has been particularly irksome even though the lease stipulates that a lease estoppel needs to be signed. Reason for his refusal? He says he simply doesn't want to. In other words, he doesn't give a crap and doesn't want to spend the effort in figuring out if the lease estoppel is ok to sign.

I can of course threaten him to terminate his lease but I would like to go the amicable route. Any suggestions that you, fellow property managers have found successful?

Hi Roger,

Is this a property you bought and closed on??

When purchasing the leases usually state that the tenants in good faith will sign an estoppel when the time comes. Now generally it goes back and forth with the buyers counsel and sellers counsel on language until it is agreed upon for execution.

Sometimes in larger retail centers a tenant will just not sign. In those cases we get "lender exceptions" where the seller signs on behalf of the tenant guaranteeing terms of the lease etc.

Please provide more info as it's unclear at this point what exactly you are trying to accomplish if you already own the property and have closed on it. 

What do you need the estoppel for?  He has a signed lease that can be used as well.  Is this a lender requirement, sale, purchase?

We're a small outfit so we do the lease estoppels directly instead of relying on our attorney.

Lease estoppels are used for purchases as well as lease financings to basically confirm that tenants are paying rent.  Lease estoppels have always been difficult.  Tenants think that something dastardly is going on.

Recently, one tenant has proven really difficult and I was wondering what strategies that you, fellow property managers have used to force tenants to sign.  In our leases, there is a provision that mandates a signature but lacks any enforcement power.

(I've decided after this latest incident to change my leases to include a copy of the lease estoppel and add a provision for liquidated damages per day for refusal to sign!)

@Roger Doe  adding language is good but run this by your attorney. I can say my tenant must walk on water in my lease, doesn't mean a court will give a darn, which may even invalidate your entire lease, or open you up to damages for not walking on water yourself. I understand you are small which is why you really should be using an attorney.

Hi Roger,

Still unclear on what you are wanting.

If this is a property under contract and say 4 tenants in a retail strip are there and 3 have validated leases signing the estoppels and the last one is a holdout then you can get the seller to guarantee and do an estoppel for that tenant as a lender exception.

Is this a mom and pop tenant, franchisee, national corporate chain guaranteeing it??

If you have already bought and closed on this property and own it then the tenant can tell you to go " pound sand ". They have no motivation to alter the lease in place especially if it is advantageous to them and vague on certain issues. You might want to shore up the lease to more in your favor but the tenant could care less. This is why BEFORE closing on a property you vet these issues out.

The liquidated damages per day it is doubtful a tenant would sign such an agreement. Maybe a mom and pop desperate to lease a space. A big dog retail tenant would laugh at your request and cross right through it. The big retailers figure you need them more than they need you.

Just let your lender know. Many times as long a certain percentage of your Tenants sign the estoppels, there won't be an issue. Especially if this is a small Tenant.

If you're unable to reason with him, it may be wise to send the Tenant a formal default notice as well to document the incident for the lease file, even if you don't act on it.

I have had Tenants do this before, all of them have been small outfits who don't understand the document they are being asked to sign.

Good luck.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here