An estoppel certificate is a signed statement from a tenant confirming the key facts of its lease. An SNDA (subordination, non-disturbance, and attornment agreement) sets the pecking order between the tenant and the lender. Together, they are how buyers and lenders confirm that the rent roll is real and that the leases will survive a foreclosure. Skip them and you are buying on the seller's word.
What an Estoppel Certificate Confirms
Once a tenant signs an estoppel, it is generally estopped (legally prevented) from later claiming facts that contradict it. That is what gives the document teeth. A good estoppel confirms:
| Item | Why it matters |
|---|---|
| Lease documents and all amendments | Catches side letters and amendments the seller did not disclose |
| Commencement and expiration dates, renewal options | Confirms the term you are paying for |
| Current base rent and next bump | Verifies the rent roll and NOI |
| Rent paid through date; any prepaid rent | Uncovers prepaid rent that will not be paid to you |
| Security deposit amount | Deposits must be transferred at closing |
| No landlord defaults or tenant claims/offsets | A tenant claiming the roof leak entitles it to a rent offset is a problem you inherit |
| Outstanding tenant improvement allowances or free rent | Unfunded TI becomes the buyer's obligation |
| Purchase options, ROFR, or ROFO rights | Could affect this sale or future sales |
| Exclusive use, co-tenancy, termination rights | Key risk items for multi-tenant retail |
What an SNDA Does
- Subordination: The tenant agrees its lease is junior to the lender's mortgage.
- Non-disturbance: The lender agrees that if it forecloses, it will honor the lease as long as the tenant is not in default. This is the tenant's protection.
- Attornment: The tenant agrees to recognize the lender (or foreclosure buyer) as its new landlord.
Lenders want SNDAs from major tenants so leases survive foreclosure and the income stream they underwrote stays intact. National tenants often insist on their own SNDA forms, which can add weeks of negotiation. Start early.
Practical Tips for Buyers and Sellers
- Buyers: Require estoppels from every tenant above a set threshold (for example, 5,000 SF or 10% of rent, often covering 75% to 90% of rent) as a closing condition.
- Sellers: Check the leases for how many days tenants have to return an estoppel (commonly 10 to 30 days) and send requests the day the PSA is signed.
- Use the tenant's lease-required form when one exists; national tenants rarely sign custom forms.
- Compare every estoppel line by line against the rent roll and lease abstract. Any discrepancy is a negotiation point before closing.
- Watch the date. Lenders often require estoppels dated within 30 to 45 days of closing, so slow deals may need to re-collect.
Frequently Asked Questions
Can a tenant refuse to sign an estoppel?
Most leases require the tenant to sign within a set time. If the lease is silent, the tenant may refuse, and many PSAs then allow a seller estoppel as a substitute, which is weaker protection for the buyer.
Is a seller estoppel acceptable?
It is better than nothing, but it is only as good as the seller's ability to pay if it is wrong. Limit the amount of rent that can be covered by seller estoppels.
Do single-tenant NNN deals need an SNDA?
If you are financing, the lender will almost always require one from the tenant. Confirm the lease obligates the tenant to sign one.
Bottom Line
Estoppels verify the income you are buying; SNDAs protect it through a foreclosure. Collect them early, read them line by line against the leases, and treat every discrepancy as a price or closing issue, not paperwork.
Educational content only, not legal, tax, or investment advice. Figures in examples are illustrative. Confirm specifics with your attorney, CPA, and lender before acting.