A dirty estoppel is much like a Dirty Martini, except it packs a
much bigger hangover if not properly digested.
On almost all major commercial real estate transactions today, a
buyer will get few if any representations on the leases other than
a statement that all of them have been delivered as well as a rent
Instead the buyer will seek comfort on the estoppels to be
delivered by the tenants (the figurative horse's mouth) who in
theory are making representations directly to the buyer and their
lender and implicitly releasing vendor from past claims (enhanced
by having the estoppel addressed to the vendor as well).
In Disneyland one would get clean estoppels from all tenants
portraying an Elysium of happy tenants.
Of course not all rides at Disney end with the same level of
ecstasy and some carry a few surprises.
Same thing with Martinis and estoppels.
Estoppels are manna from heaven for certain tenants seeking to
settle old scores or at least resurrect or embellish old
grievances given the leverage afforded them by the estoppel
importance of which they are mostly fully aware.
While most transactions do not require estoppels from all
tenants, they will be required from major tenants and often require
the vendor to provide one in lieu of the tenants who do not provide
Knowing that the alcohol content of the dirty martini might
exceed expectations or legal limits, what is a well intentioned and
prepared estoppel reveller to do?
Once the form and scope of the desired estoppel levels
ascertained, the estoppels are prepared and populated with the
required information and sent out to tenants for execution. Short
of anticipating in the purchase agreement levels of claims that
would be acceptable per tenant and in the aggregate (which would
then be subject to a holdback allowing vendor to continue to
contest or straight out credit to buyer), the parties will have to
asses the nature and extent of the claims and agree on
appropriate holdback/credit mechanisms.
There usually are no surprises but like someone said "Life
is like a box of chocolates-you never know what you will find
Hopefully most will find sweet chocolates but for those who wake
up with a hangover, take two aspirins and call your lawyer.
Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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