Don’t Sign That Estoppel Until You Read This

Most commercial office leases contain a provision that requires the tenant to promptly return an estopple upon request.  What exactly does this bit of legal jargon mean?

It’s actually pretty simple: an estoppel is a common legal document that serves to 1) confirm various aspects of a lease agreement and to ensure that important documents and facts are accurate, 2) affirm that the landlord has met all of his or her obligations and 3) confirm that there are no additional addenda or other modifications to the terms.

Basically, it states that all aspects of the lease are in effect as contemplated and “stops out” a tenant or landlord from claiming a different set of facts as true. Some of the most frequent elements of an estoppel include: 1) the lease term, 2) the rent payable, 3) the date up to which rent has been paid, 4) options for renewal and 5) defaults under the lease. This might not seem too scary; after all, an estoppel grants you certain protections.

Since most lease agreements require you to sign one, you just do it, right?  Well, not so fast.

The one most important consideration:  Do not let the estopple modify or add any additional terms!

We’ve seen estopples that waive renewal rights, affirm that the landlord had completed work that they actually had not, and even provide a personal guarantee.  Often this may be unintentional or at least not malicious.  A closing agent may be attempting to get estopples from dozens of tenants to close a new loan, so neglects to read the fine points of a lease agreement and uses a boilerplate form.  Or an ambitious attorney may be trying to protect his purchaser client by bolstering language that he’s not satisfied with in the original document.

The document your landlord sends you is not the one that you need to sign: you have the right to correct any inaccurate information, delete anything that would change or add new terms to prior agreements, and add reasonable clarification before submitting it back to your landlord.

For this reason, it is advised that you have a legal professional read over the proposed estoppel to prevent any hazardous points from trickling down to you in the future. Here are some tips for signing an estoppel:

  • Respond promptly. A landlord is often either attempting a refinance or sale, so your cooperation will likely be appreciated.  You’re probably contractually obligated to sign an estopple, just not necessarily the exact form as it was presented to you.
  • Don’t try and renegotiate your lease through an estoppel, although you can certainly use an estoppel to clarify issues or clear up any confusion.
  • Be careful! A poorly-worded estoppel can come back to haunt you in the future. Take time to fact-check, and don’t be afraid to change the language or correct any errors. This is a document that needs to be perfect.
  • Definitely object to any provisions that change the original lease agreement, limit your rights, or add to your obligations. This is a document meant to confirm what is already known, not alter your existing agreement.

A red flag for us is often a multi-page form, as length often indicates excess baggage.  Simpler is better.  Estopples are another example where Less is More.