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What is an Estoppel Certificate? - YouTube
Channel: The Residential Buyer
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an estoppel in real estate is
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a letter to certify someone's
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understanding of an underlying promise
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contract
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or agreement typically it's occurring at
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the time of a transaction and
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used to ensure that everyone agrees on
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the basics of
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uh what was previously agreed upon so
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this is one of those concepts that's
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best explained through an example so
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an owner of a commercial building went
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to a bank to get a cash out refi
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on a property okay so he explains that
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hey he just signed five new tenants and
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that increased the profitability of the
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building by
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50 grand a year um so the bank bank
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naturally
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uh does some due diligence on the
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property right they they want to
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know that the owner can afford that new
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loan payment
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so they ask the owner to provide the
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rent roll t-12
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and underlying leases on the building
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well either by mistake or maybe even
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intentionally the owner of that building
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fails to inform the bank
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that there's a tenant who's now filing a
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lawsuit
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against the owner due to not honoring
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their original
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contract that's right you see the owner
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and the older tenant they signed an
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addendum
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three years ago giving the tenant the
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right of first refusal to lease all the
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other spaces at one dollar a square foot
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when they become available and let's
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just say for this example that's 50
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cheaper than they're being leased for
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right now
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so now the bank just funded a property
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owner based on a false premise of leases
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that are eventually going to get called
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back in the court of law
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all right now back to estoppels which
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would have prevented
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that situation estoppels are meant to
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protect
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that tenant and the bank from
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inconsistencies of
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the owner's account of the underlying
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contracts it's a protective measure for
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everyone to ensure that there's
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agreement on everything that's been
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agreed on
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you see if the bank had gotten their
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estoppels signed as they're supposed to
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then the tenant
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would have made the bank aware that a
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right of first refusal addendum
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the tenant got signed three years back
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so resultantly the bank
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uh would have required that matter to
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get addressed before wiring all that
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money over to the original owner
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if you're getting value here do us a
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favor and hit that like button
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when we buy homes with inherited tenants
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we must always require estoppels to be
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signed because of the protections it
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provides both ourselves
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and to the tenant you see if the tenant
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has an option to purchase
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the property then we need to see that
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document
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if there was a lease modification at
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some point we want to see proof of that
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as well so you can see
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the two people protected with these
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estoppels are really the tenant and the
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lender or buyer
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so if you're a tenant then it's brutally
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important for your sake that you
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read over that estoppel and then get it
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signed once you can confirm its accuracy
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so what if the tenant refuses to sign
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well we've run into situations where the
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tenant believed
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that them not signing the estoppel gave
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them some leverage or something right
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a reason to start renegotiating the
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lease terms or perhaps
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get something in return for their
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signature well it does doesn't really
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work like that
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if you're the tenant and you receive an
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estoppel then
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remember that this is how you protect
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yourself review this thing
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if you see something inaccurate then
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point it out
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but whether you need to get it corrected
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or it's already good to go
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you eventually need to sign this if you
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don't
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your interests could be misrepresented
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and skewed
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in fact if you refuse to sign an
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estoppel or work with them to try and
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correct it
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then a judge is just going to discredit
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your case additionally in most cases you
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can actually be
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financially penalized uh for failing to
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sign it so remember
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that an estoppel isn't to protect the
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owner it's there to actually protect the
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tenant
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and the buyer so read over it closely if
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necessary
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request changes but either way work with
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the other parties to get it signed so
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your interests are protected
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before letting you go make sure you
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watch the next video which is about
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the buyer's checklist before getting the
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stopples signed we're even going to give
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you a free copy of our boilerplate
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estoppel we use in our transactions so
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hit that like button subscribe and
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definitely check out the next video
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