If you’re newer into commercial real estate investing, there’s one document you’ll encounter on nearly every deal that can make or break your transaction: the estoppel certificate. Yet many new investors gloss over it, treating it as just another piece of closing paperwork. That’s a costly mistake.
Here’s what you need to know.
What Is an Estoppel Certificate?
An estoppel certificate is a signed statement from a tenant confirming the key facts of their lease. Think of it as the tenant going on the record to verify what the landlord has told you about the property’s income stream. The term “estoppel” comes from the legal principle that once someone certifies something in writing, they’re “stopped” from later claiming otherwise.
In practical terms, when you’re buying a leased commercial property, the estoppel is your tenant’s sworn confirmation that the lease is what the seller says it is.
Why Estoppels Matter More Than You Think
When you buy a commercial property with tenants in place, you’re really buying two things: the real estate and the income stream attached to it. The estoppel protects that income stream. It confirms the current rent, the lease term, any options to renew, security deposits held, and critically, whether there are any existing disputes, unpaid landlord obligations, or side agreements the seller hasn’t disclosed.
I’ve seen deals where a tenant’s estoppel revealed the landlord owed them months of unreimbursed TI allowance, or that there was a handshake agreement for reduced rent that never made it into the lease file. This was rampant during the 2020 – 2022 years when COVID had dramatic impacts on tenant’s business health. These discoveries change valuations fast.
What a Good Estoppel Should Confirm
At minimum, you want the tenant to verify the lease document itself (including all amendments), the commencement and expiration dates, current base rent and any escalations, CAM or NNN obligations, security deposit amount, any options or rights like renewal, expansion, or right of first refusal, and confirmation that neither party is in default.
The gold standard also includes language that the tenant knows of no claims, offsets, or defenses against the landlord.
Who Prepares and Sends the Estoppel?
This is one of the most misunderstood parts of the process for new investors, so it’s worth breaking down step by step.
The buyer (or more specifically, the buyer’s attorney) typically drafts the estoppel certificate. Since the buyer is the party relying on the certifications, they want to control what questions are asked and how the language is structured. Experienced buyers often have a standard form their attorney has refined over multiple deals.
The seller’s attorney then reviews the draft. They’ll push back on any language that goes beyond what the lease actually requires the tenant to certify, or that creates new obligations for the seller or tenant. This negotiation is normal and usually resolves quickly.
Once the form is agreed upon, the seller or their property manager sends it to the tenants. The property manager usually handles the logistics because they have the day-to-day tenant relationships and know who to call to get signatures back quickly. They’ll follow up, answer tenant questions, and coordinate the returns.
There’s an important exception: some leases, particularly with national tenants or institutional landlords, specify the exact estoppel form the tenant is required to sign, or limit what they’ll certify. Always check the estoppel provision in each lease before drafting, because you may be working from a pre-set template with limited flexibility.
When to Request Them
Estoppels are typically requested during your due diligence period, and most leases require tenants to return them within a specified timeframe, often 10 to 20 days. Build this timeline into your due diligence schedule early because chasing tenants for signatures at the eleventh hour is a common closing delay.
A Few Pro Tips for New Investors
Never accept an estoppel with material changes without investigating. If a tenant crosses out language or adds qualifications, that’s a signal worth digging into. Always cross-reference the estoppel against the actual lease and rent roll. Discrepancies are negotiating leverage, or in some cases, reasons to walk. For larger tenants, expect their legal team to push back on landlord-favorable language. Build in time for this negotiation. And finally, lenders will almost always require estoppels for their own underwriting, so getting clean ones serves both your diligence and your financing.
The Bottom Line
Estoppels aren’t just a formality. They’re one of the most important risk-mitigation tools available to commercial investors. Treat them with the attention they deserve, and they’ll save you from inheriting problems you didn’t know you were buying.
Disclosure: Sarah is a Licensed Colorado Real Estate Broker with Shift Real Estate LLC.