What is an estoppel certificate?

What does a tenant estoppel certificate confirm?

• The lease and every amendment, so no side letter changes the deal
• Commencement date, expiration date, and remaining renewal or extension options
• Current base rent, additional rent, and the date through which rent is paid
• Security deposit amount and any prepaid rent
• Whether the landlord or tenant is in default, and any claimed offsets or credits
• Outstanding tenant improvement allowances or free rent still owed
• Purchase options, rights of first refusal, and termination rights
• That the tenant has accepted and occupies the premises

Why lenders require estoppels

A lender underwrites a leased property from the rent roll and the leases the borrower provides. The estoppel is the tenant's independent confirmation of those facts. If the rent roll shows full rent but the tenant certifies an unpaid improvement allowance or a rent abatement, the lender's income figure changes before the loan closes rather than after.

Estoppels also surface claims that no document shows. A tenant disputing a common area charge, asserting a landlord default, or holding a purchase option that was never disclosed can change how the lender values the property and sizes the loan against net operating income.

On single-tenant net lease property, the estoppel is often the most closely read closing document. One tenant is the entire income stream, so any lease issue affects the whole loan. See NNN acquisition financing for how those loans are underwritten.

How many estoppels does a lender need?

The requirement is set in the loan application or term sheet. Lenders commonly require estoppels from all major tenants and from enough smaller tenants to cover a set share of rentable area or rent. The exact threshold varies by lender and property, so confirm it when terms are issued.

For multifamily, lenders rarely ask residential tenants for estoppels and rely on the rent roll, leases, and collections instead. Estoppels matter most on retail, office, industrial, and mixed-use property with commercial leases.

How to keep estoppels from delaying a closing

• Read each lease for the estoppel clause, the response deadline, and any required form
• Pre-fill the form accurately from the lease so the tenant is confirming facts, not researching them
• Send estoppels early, since national tenants often route them through a legal department
• Resolve disputes the rent roll does not show before the lender sees the returned form
• Match each signed estoppel against the rent roll and lease abstract before submitting it

Estoppels and the rest of the closing package

Estoppels usually travel with an SNDA, which sets the tenant's relationship with the lender if the lender forecloses. Capital Partners collects both lists early on permanent and acquisition loans so tenant paperwork does not set the closing date. To start, submit the deal with the current rent roll.

Common questions