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Estoppel certificates are often the source of much angst for both lenders and borrowers in the context of closing a commercial mortgage loan. Where the collateral property relies upon commercial leases for a material portion of its income, tenant estoppel certificates are crucial to verifying the stream of rents necessary to support the subject mortgage loan. Since delivery of the estoppels relies upon the responsiveness of a third party typically receiving no direct benefit from the mortgage loan, tenant estoppel certificates may be difficult to obtain quickly or may be held up by a tenant conditioning delivery of its estoppel on the landlord’s willingness to remedy an issue with the lease or demised premises. As such, the number of acceptable estoppel certificates that must be obtained prior to closing (whether based on a percentage of rentable square feet or a percentage of tenants in occupancy) is often a well negotiated point in the term sheet stage of a loan transaction. All too often, however, after a challenging collection process and the rush to close a transaction, the estoppels themselves may contain problems, whether of a technical nature pertaining to the execution and delivery of an estoppel or, more frequently, to particular lease terms that conflict with the actual lease itself. This article addresses some common issues that arise for lenders reviewing or seeking to enforce estoppels found to be problematic after funding of a loan.

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