As a Massachusetts real estate attorney, my practice involves representing Buyers, Sellers and Lenders in real estate transactions. I am frequently involved in representing Lenders in commercial transactions and preparing documentation required to complete a commercial loan. When the Buyer is purchasing a Building with pre-existing Tenants, one of the standard documents which is required is an Estoppel Certificate from all Tenants.
The Estoppel Certificate is a document executed by the Tenant which affirms the existence of Lease, or other tenancy. indicates knowledge that the Tenant is aware the property is being sold to another owner, and indicates that the Tenant has no claims, under the Lease, or otherwise, against the current owner, through the date of the Certificate. In effect, it is protection to the new owner that the Tenant has no claims with regard to his, her or its tenancy, and will not address any prior claims once the sale transaction is completed. Since the Lender is making the loan based on the collateral which the new property owner is furnishing, the Estoppel Certificate is an essential element of the Lender's closing package.
My point in this post is to suggest that those of you who are investing, or have clients investing, in smaller investment properties, [two, three or four family apartments come to mind], should insist on Estoppel Certificates as part of your closing package, even if the loan is being completed through non-commercial circumstances. In Massachusetts, and probably most other jurisdictions, as well, there is no problem as bad as having a difficult Tenant. Inheriting a Tenant who is disgruntled, or who has claims against the former owner, is a recipe for repeated Court appearances, and additional legal expenses. Flushing out these problems from the "get-go";, even if it involves the prior owner palliating the Tenant with money or repairs, can do nothing but make the overall effect of the transaction more positive.
I have developed an Estoppel Certificate for smaller investment transactions in Massahusetts. I would be more than happy to share same with you, if you contact me.
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