The client had been an office tenant in their Detroit location for many years. They contacted Compass Commercial after the building had been listed for sale and a buyer was completing their due diligence by asking the tenant to sign off on an estopple certificate, which is a letter sent from a prospective buyer to each tenant in a building they are trying to purchase. The document outlines the terms of an executed lease agreement, which the tenant must sign and return the prospective buyer, provided the information is correct. The tenant typically has less than 10 days to respond to this request. When the tenant signs an estopple, they are stating that the lease terms in the estopple are correct. This tool is used to ensure that there is no fraud involved in the transaction. Unfortunately for everyone concerned, the terms in the estopple didn’t match the lease terms. In fact, the tenant had never signed the lease agreement because the landlord had doubled their rent, and the tenant needed to expand their leased premises by 50%. The prospective landlord thought he was buying a building with rental rates significantly above market for the Detroit market.
What We Did:
The first thing we did as the tenant’s representative was contact the listing agent to explain why the tenant could not sign the estopple document.
Since the tenants were on a month-to-month lease, we quickly identified alternative locations in the market. In the event a deal couldn’t be made with the new landlord, the client needed to be able to relocate in 90 days or less. In addition, the client needed to be located within walking distance of the federal courthouse; therefore, the search was confined to a small area.
A site search identified 3 sites within the area that met the criteria. We set up tours for 3 the alternative sites and sent out requests for proposals on two of them. A request for proposal was also sent out to the prospective new landlord.
We were able to work out a good transaction for both the tenant and the landlord.
The tenant’s rent was reduced by $16.00/s.f., which resulted in a savings of over $2.3 million dollars over 7 years.
The tenant was able to expand their leased premises by 7,000 s.f.
The new landlord provided a turnkey buildout on the new space.
A new and fair lease was negotiated and executed, protecting the future rights of the tenant.