If you want to be successful in the world of commercial real estate, you need to learn a lot of legal and technical jargon. This will help you understand many concepts and be able to make better investment decisions. Today, understanding technical and legal terms are not only limited to experts anymore.
Anyone can search the internet and understand new concepts that will help them make better decisions. So, let’s explore and understand such a term that is commonly used in commercial real estate. The term in question is estoppel. What is estoppel, and what is its use? Let’s find out!
What Is An Estoppel In Commercial Real Estate?
To explain it simply, estoppel is basically a legal guarantee that the person, be it the tenant or the landlord, will be legally bound to stay true to their promise. For example, if a landlord promises that they will not evict a tenant as long as they maintain and upkeep the property. The estoppel can guarantee that the landlord will not be able to take back his word and evict the tenant as long as they maintain their end of the promise, which was to maintain and upkeep the property.
For non-specialists, it may seem that estoppel is basically like a contractual term, but it is not. Any contractual term has consideration embedded into it. Any contractual term that does not have any room for consideration is practically void. This is, however, not the case with estoppel. The promises made under estoppel need to be maintained with almost no formal requirement to have any room for consideration for the promises made. So, that is one of the key differences between estoppel and a contractual term.
So, that brings us to the question, why would you need an estoppel certificate in commercial real estate? There are many reasons. However, let’s discuss the main reason.
Why Do You Need an Estoppel Certificate or Letter?
When it comes to commercial real estate having an estoppel certificate or letter can be really beneficial for you both as a tenant and a landlord. How? Let’s explore the reasons.
● Tenant
As a tenant having an estoppel certificate or letter can help you ensure that your lease or rent is safe and that the landlord can not just change their word, change the terms of your rent, or terminate you. This helps you stay safe in your lease and ensures you that the promises made by the landlord will be maintained and that you get an additional layer of safety in your agreement.
● Landlord
As a landlord having an estoppel letter enforced ensures you that the tenant will not be able to take back their promises or change their word after giving it. This helps you be safe and secure about your rent or lease agreement and guarantees that your terms will be met no matter what.
Final Thoughts
Having an estoppel certificate or letter enforced can protect your interests and terms while guaranteeing that the other party is bound to stay true to their word. It is commonly believed that no significant purchase or lease of commercial property is completed without an estoppel letter. So, if you are new to the world of commercial real estate, you can draw up your own estoppel when you are buying or renting your property.
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