Tag Archives: tenant

Estoppels: What are they? Why should you care?

Post By : admin 21 May 2015 Leave a comment

Lots of buildings are selling right now. It seems like every day there’s another announcement of a building in the Dallas Fort Worth area trading hands. As part of the sale or refinancing of an office or warehouse building, tenants will be asked by the landlord to sign a document known as an estoppel. In fact, most leases require a tenant to sign an Estoppel and failure to do so can result in a tenant being put in default.

What is an Estoppel?  In the simplest terms, an estoppel is a legal document where a tenant confirms the terms of the lease and makes representations to another party (building purchaser or lender) about the lease.  It has two goals. First, verify the terms of the lease (dates, rent, options, security deposit). Second, prevent the tenant from asserting claims related to the lease at a later time which are not consistent with the representations made in the estoppel.  As part of the due diligence process, a buyer or lender wants to know that the lease information the landlord gave them are, in fact, accurate and that there are no outstanding claims or defaults by either landlord or tenant.

The lease will typically specify that the tenant must sign the estoppel within a given number of days. This is necessary because estoppels are usually the last thing to be done before a sale or loan is closed so there isn’t a lot of time to get them done. Furthermore, most leases will state that if the tenant doesn’t sign the estoppel within the required time, the landlord can sign it on behalf of the tenant and the tenant may then be in default as well.

In negotiating the estoppel provision of a lease, the tenant should be sure to allow enough time to review the document and make comments to it, delete language allowing the landlord to sign the estoppel on the tenant’s behalf, negotiate the estoppel itself and attach it as an exhibit to the lease, and add language allowing the tenant to request an estoppel from the landlord and/or lender.

What should you do when you get an estoppel from your landlord? Most importantly, be careful because it could change the terms of your lease.  Estoppels are often not accurate because they are prepared for all tenants in the building at one time and by people usually not familiar with the building or tenants. Here are some things to keep in mind:

1. Note how much time you have for review.

2. Review the lease including amendments taking special note of the estoppel provision.

3. Verify that the names and addresses of all parties.

4. Verify that the original lease, amendments and other documents related to the lease are properly reference in the definition of “Lease” including the dates of those documents.

5. Confirm facts with personnel in the local office to which the lease applies to be sure there are no operational concerns with the building – HVAC, plumbing, electrical, etc.

6. Be sure that all of tenant’s options to renew, expand, terminate, etc. are noted.

7. Check to be sure of the status of the payment of rent and other charges to be sure the amounts in the estoppel are accurate.

8. Delete any language which adds new obligations on tenant that are not shown in the lease.

Remember, the estoppel is supposed to simply record the facts of the existing lease and not renegotiate it.

 

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.

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Does Your Real Estate Agent Have a Specialty? Does it Matter?

Post By : admin 23 April 2015 Leave a comment

Several years ago I was talking to a friend and mentioned that I had sold a house as a For Sale By Owner (FSBO). He was surprised that it was possible to buy or sell a house without a residential real estate agent. I was shocked that he didn’t know he could trade real estate without a broker – however ill-advised that might be.

Brokers can only negotiate the sale or purchase of a house, right? Aren’t they all the same since they have access to the MLS? Even though I’ve been in the real estate business for over 31 years now, these misconceptions surprise me. I haven’t had access to the MLS for all but 2 years of my career and I’ve almost always hired a residential agent when buying or selling the homes I’ve lived in or bought for investment.

Real estate brokerage has evolved in the last 30 years to become a highly specialized industry. Many brokers have essentially become real estate advisors providing financial analysis, demographic studies, market analysis, site selection research, business planning, portfolio analysis and management, marketing plans, and even construction management in some cases. This is more the case for commercial brokers, but residential brokers have also become specialized.

For example, residential agents usually specialize based on geography first and then by the price range of the house, type of house (single-family, high-rise condos, etc.), type of client (owner-occupant or investor, buyer or seller), and type of service (sales or property management). Many will be a combination of these specialties – seller agent for high-rise, luxury condos in the Uptown area of Dallas.

Commercial brokerage is far more specialized than residential. Agents will often specialize based on 4 factors. First, by geography. Dallas or Phoenix. Arlington or McKinney. Second, by product type. Office, industrial, retail, hospitality, or multifamily. Third, by client type. Seller or buyer. Landlord or tenant. And finally, fourth, by service provided. Investment sales, tenant rep, project leasing or property management.

These criteria can be cumulative, of course. So an agent may focus on McKinney, retail properties, for landlords, for lease. One broker I know only represents church properties, but does so throughout the country. Another only sells large office buildings on behalf of owners in Dallas. While yet another handles only corporate real estate services for corporate tenants in Collin, Dallas, Tarrant and Denton counties.

The degree of specialization is often a function of the size of the market. For example, a commercial broker in Amarillo may have to represent both owners and users of several product types because there isn’t enough business in any one specialty to make a living. In Chicago, on the other hand, it’s more likely that a broker would focus exclusively on owners or users with further specialization by product type.

Rarely do you see brokers cross the residential/commercial line though many of the national residential brokerage companies are trying to set up commercial divisions. You just can’t be all things to all people. If someone tries to do that, it’s a clear sign you shouldn’t hire him/her.

The good news is that owners and users of real estate have an incredible array of options when hiring a broker to represent their interests. The greater the specialization, the better the quality of service in most cases. It’s important to find an agent who specializes in the area, product type, client type and service that fits your assignment. The agent must be of impeccable integrity, be willing to listen to your needs, and have the time to focus on your assignment. Don’t be afraid to use one broker to help your company lease space, another to find a house to buy, and yet a third to handle your investment property. Ask for referrals even from a broker you have used.

Oh, and by the way, there is no law saying you have to use an agent at all.

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. based in Plano, Texas – www.texastenantrep.com. You may contact him by email at bob@texastenantrep.com or by phone at 972-468-1946.

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