The Real Estate Lease Estoppel Certificate

The real estate lease estoppel certificate clause in your lease usually affects tenants only when a building is sold. Potential buyers want to know that tenants are not in default of the lease and are not owed any money by the current landlord (such as tenant allowances or overcharges for operating costs that may have been uncovered in a lease audit.

Although some courts have ruled that Toronto office space tenants who agreed in a real estate lease estoppe certificate that there are no outstanding overcharges, in practice I have seen tenants who were substantially overcharged but who had signed these certificates without getting legal input denied payment of these overcharges.

Robert Machson, a Principal of Robert A. Machson & Associates LLC, a New York law firm representing tenants suggest that tenants keep a few issues in mind.

First, when negotiating the lease, do not permit the landlord to execute the real estate lease estoppel certificate for the tenant if it is not returned within the time period allotted — which should be at least 15, and preferably 30 days. Rather, the obligation to return the certicate is a condition of the lease; a tenant's failure to comply is a breach. Second, don't permit the certificate to be used “offensively.”

Machson says that if a tenant is undertaking an audit of rent or other charges, the certificate should be amended to the effect that “this statement is subject to any claims for overcharges that may be discovered in audit by Tenant.”

Even if no audit is under way, or even planned, a tenant may still protect itself by inserting a phrase, such as, “this statement does not cover facts or conditions not within the Tenant's actual knowledge at the time of execution.” If the tenant already has knowledge of overcharges or other breaches of the lease, it is certainly prudent to include them in the estoppel.

Most Toronto Commercial Real Estate landlords give you only five to ten days to sign an real estate lease estoppel certificate and some as Machson has suggested will sign it for you if you fail to do so within this time period.

A competent lease consultant or a real estate lawyer will be able to give you input both at the lease negotiation stage and at the time when an real estate lease estoppel certificate is demanded. Protect your rights!

Although some courts have ruled that Toronto office space tenants who agreed in a real estate lease estoppe certificate that there are no outstanding overcharges, in practice I have seen tenants who were substantially overcharged but who had signed these certificates without getting legal input denied payment of these overcharges.

Robert Machson, a Principal of Robert A. Machson & Associates LLC, a New York law firm representing tenants suggest that tenants keep a few issues in mind.

First, when negotiating the lease, do not permit the landlord to execute the real estate lease estoppel certificate for the tenant if it is not returned within the time period allotted — which should be at least 15, and preferably 30 days. Rather, the obligation to return the certicate is a condition of the lease; a tenant's failure to comply is a breach. Second, don't permit the certificate to be used “offensively.” For more information on real estate lease estoppel certificates

Toronto Commercial Real estate lease estoppel to the Home Page