“Not another one,” he exclaimed. Kent was a long-time customer, now friend. He and I had just wrapped up a series of successful morning meetings, so we decided to reward ourselves with some much needed coffee. As we settled in to the break room nearby, I chose a particularly tasty Dark Columbian roast. Kent, on the other hand, chose to check his email. Poor choice. All at once, he looked exhausted…beaten. I feared something awful must be in that email. A layoff maybe? An unexpected pregnancy? They found another Kardashian? (Overactive imagination? Maybe…but the suspense was killing me.) Thankfully, I didn’t have to wonder long. As I passed him a cup of coffee, he rolled his eyes and groaned, “Another &#@! estoppel request.”
Estoppel requests don’t look that bad on paper, but as an experienced lease administrator and property accountant, Kent knew all too well the effort it would take to respond to it properly. Under normal circumstances, they’re a nuisance, but they’re manageable. Lately, however, he explained the volume of requests was off the charts due to the Fed’s likely rate hikes. More refinancing evaluations meant more estoppel requests…all just in time for the holidays. And if it’s true for Kent, then I’m sure it’s true for many of you.
This got me thinking, it’s pretty clear you should brace yourself for the onslaught (if it hasn’t already begun). And with that in mind, it’s not a bad time to share a few thoughts on estoppels, how to handle them and how to make the most of the situation.
A few important things to remember…
It’s not all bad. If you’re a glass half full person, the landlord or lender just dropped a tiny gift in your stocking. Remember that they need that estoppel letter quickly and without blemish, so use that little bit of leverage wisely.
Know your lease. Did you receive the estoppel request in accordance with your notice provision? What representations specifically are required in your estoppel? Is there a form of Estoppel attached as an exhibit? Are you being asked to represent more than that form? (That form was hotly negotiated once upon a time). Limit the scope of the Estoppel to the facts of the lease and its representation to the requesting third party. Do not allow the landlord to expand the tenant’s obligations or lessen its rights.
Watch the clock! What is the timeframe within which you have to respond per the lease?
Find strength in numbers. Don’t go it alone…fire up the phone/email tree. Make a list of key personnel with insight into any issues or matters of default on the property. You should speak to property managers, attorneys, accountants, maintenance personnel, even store/office managers. For example, has the landlord not fixed that defective HVAC as required by the lease? Now’s the time to get these issues resolved while you have this little bit of extra leverage.
Don’t overcommit. Where possible, preface your representations with “to the best of Tenant’s knowledge…”
Keep it all in hand. Be sure your rents paid and all future obligations are up to date in AMTdirect. A few handy reports should keep this information at your fingertips for any lease at any time.
Know What You’re Owed. Does the landlord owe any Tenant Improvement Allowance or Rental Abatements? An Estoppel is the perfect instrument to memorialize these items
Make ‘Em Work for It. Does your lease have a “Landlord’s Work” clause? If this is a new lease, the landlord may have agreed to complete certain improvements prior to your possession date (Example: upgrade restrooms or elevators to be compliant with current ADA specifications.) If the work is not completed, it should be noted in the Estoppel.
You Have a Right to an Attorney. Last but certainly not least, be sure your estoppel is reviewed by a real estate attorney before execution.
Whether it’s Cousin Eddie or a pile of estoppel requests, nobody likes uninvited guests. Nonetheless, if landlords and lenders deck your halls with estoppels this year, keep these helpful tips in mind and ring in the New Year knowing things are well in hand.