You come and go, you come and go.

When purchasing commercial real estate that is tenant-occupied, particularly if the new owner intends to take over the existing leases, there are several key considerations a prospective buyer should address. One of the first steps is to obtain and review copies of the existing leases with the assistance of legal counsel. This ensures that the purchaser is fully aware of any unique clauses or provisions within the leases that could affect their use and enjoyment of the property.

The buyer must also ensure that tenants are notified about the change of ownership and provided with clear instructions on where and to whom rent payments should be made after the closing date. If this notification is not given, tenants may continue paying rent to the previous landlord without facing liability. If the vendor is responsible for issuing the notice, the purchaser should request a copy of the notice and verify that it has been delivered to all tenants before or at the time of closing.

In addition to the standard closing documents involved in a commercial real estate transaction, the purchaser should request that the vendor provide estoppel certificates (or “tenant acknowledgments”) signed by the tenants. These certificates offer important information, including:

• The amount of rent being paid, including both base rent and additional charges.
• The square footage of the leased premises.
• Confirmation of the lease type.
• A statement confirming no changes have been made to the lease terms.
• Information on any deposits or prepaid amounts held by the landlord.
• Confirmation that there have been no breaches by the landlord under the lease.

It’s essential for the purchaser’s offer to include a requirement for the vendor to provide these estoppel certificates. Ideally, the form of the estoppel certificate should be negotiated in advance and included as part of the purchase and sale agreement. In some instances, the lender may also require copies of these certificates, so it’s wise to consult with the lender early to understand any specific requirements they may have.

This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)-448-2637 or by email to info@touchstone.law