By the Numbers
A buyer of your leased industrial building is buying your tenants’ leases, so they will ask each tenant to confirm in writing what those leases say. The paperwork is routine, but it is also one of the most common reasons a clean deal runs late. Here is what buyers ask for, and how to have it ready before you list.
What an estoppel certificate is
An estoppel is a short statement, signed by the tenant, that confirms the key facts of the lease: the lease and amendment dates, current rent, security deposit, term and expiration, any prepaid rent, and whether the landlord or tenant is in default. The buyer relies on it. Once a tenant signs, it is difficult for them to later claim something different, which is why buyers and their lenders treat it as proof that your rent roll is accurate.
What an SNDA does
A subordination, non-disturbance and attornment agreement (SNDA) matters when the buyer is using a loan. The lender wants the tenant to agree that the lease sits behind the new loan, and that the tenant will recognize the lender if it ever takes the property back. In exchange, the tenant is promised that its lease will not be disturbed as long as it is not in default. Not every deal needs one from every tenant, but lenders often ask for them on larger leases, so it is worth knowing early which leases will be asked.
Where deals get stuck
The tenants are rarely the problem. The usual causes are smaller and avoidable:
The rent roll does not match the leases. A side letter, a rent abatement, or a renewal that never got papered shows up when the tenant fills in the estoppel. A buyer who finds a surprise in due diligence reopens the price, even when the item is small.
The lease does not say how fast a tenant must respond. Many industrial leases require a tenant to return an estoppel within a set window, often 10 to 20 days, but your lease controls. Some leases are silent, and a small local tenant with no obligation to hurry can hold up the file.
The tenant hears about the sale from a form letter. A tenant who gets a legal-looking document with no warning tends to call their own attorney, which adds time.
How to get ahead of it
- Build the lease file first. Pull every lease, amendment, commencement memo, option notice, and side letter into one folder. Reconcile it to your rent roll line by line, before a buyer does.
- Check each lease for estoppel and SNDA language. Note the required turnaround, the form, and whether the tenant can be asked more than once or only on request from a buyer or lender.
- Talk to tenants before the paperwork arrives. A short call from you or your property manager explaining that the building is for sale, and that a form is coming, keeps the process routine. Tenants you have renewed on good terms are usually cooperative.
- Use a standard form. Offer a plain one-page estoppel that tracks the lease. If a buyer’s lender sends its own long form, it is a negotiation, and it is better to have your version ready early.
- Resolve known defaults and open items now. A tenant who is behind on rent or has an unresolved maintenance complaint is the one most likely to qualify the estoppel. Settle it before it goes out.
Pro Tip: Treat the lease file as a marketing document
A buyer who sees a reconciled lease file at the start of due diligence trusts the rent roll and is less likely to ask for a price adjustment later. If you are weighing whether to sell leased or vacant, see our guide on what your building is worth to each buyer.
An illustrative timeline
Suppose a multi-tenant park with eight tenants goes under contract. If the buyer’s due diligence period is 30 days and estoppels go out on day 3, a tenant with a 15-day turnaround answers by day 18, which leaves time to resolve a question. If the estoppels go out on day 15 because the lease file had to be assembled first, the same tenant answers on day 30, and any problem lands on the last day of the contingency period. (Illustrative timeline, not a market statistic.) Starting the file before you list is what moves that first date.
Where this fits in your sale
Estoppels and SNDAs are one piece of a cleaner process. Our guide on how to sell an industrial property in the East Bay covers the rest of the path from pricing to close, and renewing your strongest tenants early tends to make this paperwork easier too. If your lease files need a review before you list, I am glad to look at them with you.
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