By Sheldon A. Halpern and John R. Cauble Jr.

Tenant estoppel certificates can be used against tenants to change the terms of their leases. In the California case of Plaza Freeway Limited Partnership v. First Mountain Bank, 81 Cal.App.4th 616 (2000), the court held that a tenant was conclusively bound by the lease termination date recited in its estoppel certificate even though inconsistent with the actual date. Plaza Freeway serves as a warning that tenants should not sign the forms submitted by their landlords without careful consideration. Tenants should be wary not only of inadvertently changing lease terms, but also of intentional efforts by landlords (and their prospective buyers and lenders) to amend the lease by means of the estoppel certificate.

Tenants may consider the following approaches helpful in managing the risks inherent in giving an estoppel certificate, depending of course on their bargaining positions, relationships, the relevant lease provisions and the specific facts. While the following may serve as a useful checklist, not all of these approaches will be appropriate or obtainable in every case.

REVIEW THE DOCUMENTS

• Review the lease provisions (if any) regarding the delivery of estoppel certificates and the consequences of failure to comply. Comply with any express requirements.
  
  
• Review the submitted form of estoppel certificate for accuracy. Check your files and the appropriate people in your company. Correct any mistakes.
  
  
• Identify any outstanding grievances. Include any unresolved grievances in the estoppel certificate.
  
  
• Consider deleting surplusage. The trend over time has been for estoppel certificate forms to grow longer and longer. However, to the extent that the form goes beyond lease requirements and customary practice, the tenant may want to delete the surplusage in order to avoid the risk of inadvertently being bound by a mistake. Alternatively, the tenant may be willing to offer more than the required minimum as a bargaining chip in exchange for something desired by the tenant from the landlord.
  
  
• Identify the documents constituting the entire lease. Estoppel certificates usually contain a statement to the effect that the described lease is the “entire agreement” between the landlord and tenant. Determine whether you should list any amendments, notices, formal side letters or even informal letters containing additional agreements by the landlord in order that they be preserved and not waived.
  

• Limit to tenant’s “knowledge” factual statements such as whether the landlord or tenant is in default or whether the tenant has any claims against the landlord. The landlord will often want a standard of “best knowledge,” which a court might deem to include a duty to investigate as well as the knowledge of all of tenant’s agents and employees and all information in tenant’s files. Do not use best knowledge, and seek to define tenant’s knowledge as:
  
  
  
  • actual knowledge
    
  • of a specified individual
    
  • (state that such specified individual will have no personal liability)
    
  • without investigation
    
  • without constructive or imputed knowledge
    
  
  
  
• State that nothing in the estoppel certificate will be deemed to amend the lease, and that in the event of any conflict the lease will control.
  
  
• Provide tenant’s statements rather than its warranties, representations or certifications.
  
  
• State that the estoppel certificate may only be used to estop the tenant from asserting facts inconsistent with tenant’s statements in the estoppel certificate, and accordingly that the tenant will not have any liability for inaccuracies in the estoppel certificate. Take as an example an estoppel certificate delivered to a landlord and its proposed buyer where the tenant states that all improvements were constructed by landlord in compliance with the lease (assuming for purposes of this example that the tenant was not able to limit this statement to its knowledge), but in fact the improvements were defectively constructed. While this statement may estop the tenant from later making a claim for defective construction, the buyer should not be able to sue the tenant for misrepresentation.
  
  
• State that the beneficiary may not rely on any statement that it knows to be incorrect.
  
  
• Date the certificate no later than the date you deliver the certificate to the landlord. Otherwise, the landlord could either write in a later date or leave it undated and argue that it was intended to be effective as of a later date.
  

• Ask for a reciprocal provision obligating the landlord to provide an estoppel certificate for a future sale or financing by the tenant (unless, of course, the lease already contains this provision).
  
  
• Ask the landlord to give a corresponding estoppel certificate (including successors and assigns language) concurrently with the delivery by tenant of its estoppel certificate. The landlord may be willing to give a clean estoppel certificate in order to receive the same from the tenant. The landlord’s clean estoppel certificate could prevent the landlord (or its buyer or lender) from later asserting an alleged default by the tenant based on facts known to the landlord when it gave its estoppel certificate. Further, to the extent that the tenant adds documents to the description of the lease or sets forth its interpretation of a controversial provision, if the landlord signs an estoppel certificate, it will be harder for the landlord to later argue that the listed documents were not binding or that tenant’s interpretation was not correct.
  
  
• Ask that any amendments favorable to the tenant be set forth in a formal lease amendment rather than merely in the estoppel certificate. As with any lease amendment, make sure the consent of any existing lender has been obtained.