Why a buyer needs more than the lease file

An office or retail property can appear stable on a rent roll while tenants and landlords disagree about concessions, defaults, renewal rights or unpaid improvements. Estoppel certificates and subordination, non-disturbance and attornment agreements (SNDAs) help buyers, lenders and tenants address different parts of that risk.

What a tenant estoppel certificate does

An estoppel certificate typically asks a tenant to confirm selected facts about its lease: parties, amendments, commencement and expiration dates, rent, deposits, options, defaults, concessions and landlord obligations. Buyers and lenders use those representations to test the rent roll and diligence record.

The form should match the actual lease and should not pressure a tenant to certify facts it cannot verify. A landlord-provided certificate is not a substitute for reading the lease, amendments and relevant correspondence.

What an SNDA does

An SNDA addresses the relationship between the tenant’s lease and a lender’s security interest. Subordination concerns priority. Non-disturbance generally seeks to protect the tenant’s occupancy after specified foreclosure-related events if contractual conditions are satisfied. Attornment concerns recognition of the successor landlord.

The terms are negotiated. A tenant should review notice and cure rights, treatment of prepaid rent, security deposits, offsets, construction obligations and lease amendments rather than assume “non-disturbance” means every lease promise will survive unchanged.

Coordinate the purchase and financing

A buyer may require delivery of estoppels from major tenants as a closing condition, sometimes with a threshold based on rentable area or revenue. The lender may require particular SNDA forms for anchor tenants.

The parties should plan who requests signatures, which exceptions are acceptable and what happens if a tenant reports a material dispute. Waiting until the final week before closing can jeopardize financing and create avoidable leverage.

Practical closing checklist

Compare estoppels against rent rolls, leases, amendments and accounts receivable; identify unfulfilled tenant improvement obligations; review subordination language and existing recorded documents; and negotiate realistic closing conditions. The goal is to verify income and occupancy, not merely collect signatures.

For transaction-specific guidance, see Alex Nahai Law’s related legal services. Legal advice depends on the documents and circumstances of each matter.

This article provides general information, not legal advice, and does not establish an attorney-client relationship.