Landlords seeking to sell, refinance,or mortgage their building generally need tenants to sign a document called an estoppel certificate listing statements or “representations” that a purchaser or lender needs to know are true to proceed with the transaction. A tenant’s failure to sign the estoppel certificate promptly may cause the deal to fall through. By the same token, it’s understandable why a tenant would balk at putting its name to a document legally certifying to the truth of representations for the benefit of a third party with which it has no direct relationship.

Waiting until after the deal is in place puts the tenant in the driver’s seat. That’s why it’s advisable to address the issue proactively when tenants first sign their lease and before an actual estoppel certificate is on the table. Leasing strategy: Create a clause that lists the various representations a prospective purchaser or lender may ask for in a future purchase or financing and that requires the tenant to certify the truth of any or all of those representations within 10 days of your request. 

Here are the 22 representations the lease clause should include, along with a Model Lease Clause that you can adapt for your own circumstances. 

1. Confirmation of the Signed Lease

A prospective purchaser or lender will want confirmation that the tenant signed a lease with you on a specific date. It may also want you to attach a copy of the lease as an exhibit to the estoppel certificate to prove that the lease the tenant confirms is the same lease that you confirm in the purchase or loan agreements [Clause, par. a]. 

2. Description of the Space

An estoppel certificate will likely contain a representation that describes the leased space to ensure that there are no disputes about what space the tenant may use and must pay rent on. So, require the tenant to confirm that the space is as described in the floor plan attached to the lease. You may also have to attach the floor plan to any estoppel certificate the tenant actually signs [Clause, par. a].    

3. Lease & Amendments Are in Effect

Get the tenant to agree to confirm that the lease is in full force and effect and hasn’t been changed, except via modifications and amendments that the tenant has validated. For purposes of precision and clarity and avoiding future miscommunications or disputes over amendments, missing pages, and such, the tenant should list the exact number of pages that the lease and any lease amendments contain [Clause, par. b].  

4. Start & End of Lease Term

Have the tenant agree to confirm the dates that the lease term began and will end. The tenant should also confirm the date on which lease payments began if the commencement date isn’t the same as the rent commencement date [Clause, par. c].

5. Tenant’s Renewal or Extension Options

A prospective lender or purchaser will likely want confirmation of whether the tenant has any options to renew or extend the lease and, if so, the terms of and if the tenant has exercised any of those options [Clause, par. d].

6. Tenant’s Other Lease Options

Require the tenant to agree to confirm any lease purchase or expansion options it holds, including rights of first refusal and/or first offer for additional space, along with information about the terms of and previous exercise of any of those options [Clause, par. e]. 

7. Degree of Tenant’s Possession of Leased Space

An estoppel certificate will likely include a representation about whether the tenant is currently in possession of the entire leased space and, if it’s not, whether it has assigned the lease or sublet all or any part of the space to a third party. A purchaser or lender may also want the tenant to attach a copy of the assignment or sublease agreement to the estoppel certificate [Clause, par. f]. 

8. Amount of Current Minimum Rent 

Secure the tenant’s agreement to confirm its minimum monthly rent under the lease and the amount of any additional rent at the time it actually signs the estoppel certificate [Clause, par. g]. 

9. Tenant’s Payment of Current Minimum Rent 

The tenant should also confirm the dates up to which it’s paid all minimum rent, additional rent, and other lease charges due. Including this information in the estoppel certificate enables the purchaser or lender to determine whether there are any existing monetary defaults [Clause, par. g].

10. No Payment of Advance Rent

Require the tenant to certify that it hasn’t paid any rent due for more than 30 days in advance of its due date to assure a prospective purchaser that it will be able to collect the full balance of the expected rent from the tenant after the sale. After all, no new owner wants to find out that the tenant has already paid out all or most of the remaining balance payable on the current lease term to the previous landlord [Clause, par. h]. 

11. Current & Future Rent Concessions

An estoppel certificate may include a representation about whether the tenant is currently receiving or has been promised free rent, rent abatements, or other rent concessions, as well as the terms of those concessions, including when current concessions end and future concessions kick in [Clause, par. i]. 

12. Completion of Alterations

Landlords who agree to make alterations or improvements to a tenant’s space should ensure that the estoppel certificate clause includes the tenant’s agreement to represent that the work was fully and adequately completed in accordance with the terms set out in the plans contained in the lease or work letter. You may have to alter this language to provide for the possibility that the work will still be ongoing at the time of the prospective purchase or finance agreement [Clause, par. j].   

13. No Landlord Lease Violations

Expect purchasers and lenders to want confirmation from the tenant that:

• The landlord is currently not in violation of the lease;
• The tenant currently knows of no uncured lease defaults by the landlord; and 
• The tenant has no basis to cancel the lease or exercise any of its other remedies for a landlord default [Clause, par. k].

14. No Tenant Claims Against Landlord 

In addition to assurances against landlord defaults, an estoppel certificate will likely ask the tenant to represent that it isn’t entitled to assert any claims, counterclaims, or legal defenses against the landlord under the lease over any condition or dispute in existence at the time it signs the certificate [Clause, par. l]. 

15. No Degradation of Tenant’s Financial Condition

Purchasers and lenders will want to know that they can rely on the due diligence you did on a tenant’s financial condition before entering into the lease. So, get the tenant to agree to confirm that its financial condition hasn’t undergone any material adverse changes since it signed the lease. A tenant may push back on this, contending that terms like “material adverse changes” are too subjective and insisting that any representations about its financial conditions at the time of sale/finance be limited to objective, documented facts, such as current revenues or profits [Clause, par. m].  

16. No Pending or Imminent Tenant Bankruptcy

While representations involving a tenant’s finances may be a sensitive subject, a tenant should at least be willing to represent that there are no currently pending bankruptcy actions or imminent plans to seek bankruptcy protection at the time it signs the estoppel certificate [Clause, par. n].  

17. Tenant’s Rights Subordinate to Purchaser/Lender

Prospective purchasers or lenders may demand a representation in which the tenant acknowledges that its rights in any dispute with the landlord are subordinate to any rights that a purchaser or lender might have. The lease may already contain a clause to this effect. If so, a tenant may claim that including it in the estoppel certificate clause is redundant and ask you to remove it. This may be a fair demand but speak to your attorney before agreeing to it [Clause, par. o].

18. Lack of Purchaser/Lender Responsibility for Tenant Claims Against Landlord 

Make the tenant agree to confirm in the estoppel certificate that the purchaser or lender may not be held responsible for any of the tenant’s claims against you [Clause, par. p].

19. No Future Lease Changes Without Purchaser/Lender Consent 

The tenant should agree to acknowledge that it’s aware of the prospective sale or mortgage and that no future lease modification or cancellation will be able to take effect without the written consent of the purchaser or lender [Clause, par. q].

20. Acknowledgement of Inducement

Require the tenant to acknowledge that the purpose of the estoppel certificate is to induce a purchaser to buy the building or a lender to grant a mortgage loan and that the prospective purchaser or lender will rely on the truth of the statements the tenant makes in the estoppel certificate [Clause, par. r].

21. Tenant’s Signatory Is Authorized

The tenant should also be prepared to acknowledge that the person who signs any future estoppel certificates on its behalf is authorized to bind it. This is a standard legal protection to which tenants are unlikely to object [Clause, par. s]. 

22. Other Reasonably Requested Information 

You can never be completely sure what representations a particular purchaser or lender will want a tenant to make. So, end the clause with a catchall provision requiring the tenant to certify the truth of any other items that you might reasonably request [Clause, par. t].