Interviews with Neil: Estoppel Certificate

Estoppel Certificates

This week McGraw Commercial Properties’ Neil Dailey spoke again with Rich Marshall with Conner & Winters, this time discussing the Estoppel Certificate.

Here is a brief look at what they discussed:

What is an Estoppel Certificate?

Estoppel is a term most people are likely unfamiliar with. According to Webster’s Dictionary, an Estoppel is a legal bar to alleging or denying a fact because of one’s own previous actions or words to the contrary.

An Estoppel Certificate is a signed statement that a party (typically a tenant) executes in favor of other interested parties (i.e. buyers, sellers, and lenders).

What Does an Estoppel Certificate Do?

These certificates are common in a purchase or loan transaction and function in a couple of ways depending on the situation.

In a Purchase Transaction

Predominantly used to when a Buyer is interested in buying real estate that has tenants.  Estoppel is used to get info from the tenants as to any claims or default allegations the tenants may have against the Landlord (which is your Seller).  A part of Buyer’s due diligence in underwriting the purchase of the Property.

In a Loan Transaction

Predominantly used when a lender is interested in making a loan that will be secured by real estate that has tenants.  Estoppel is used to get info from the tenants as to any claims or default allegations the tenants may have against the Landlord (which is the Borrower).  A part of the Lender’s due diligence in underwriting the loan.

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