How to Find Out the Real Terms of Potential Tenants’ Leases When You are Considering Buying a Commercial Property

When you are investigating a potential commercial real estate investment, one of the things that you will be most interested in is how that property turns a profit. Generally, your profits will be tied directly to the rents that you can charge. As a result, you will be very interested in every detail of every tenant’s lease.

However, just because a lease says one thing does not mean that the terms in the lease are what the tenant is abiding by. In fact, there may be addendums or informal agreements in place that dramatically alter the terms of the rents. As a result, once you have rent rolls from a property, you will want to take an additional step to verify that the numbers on the rolls match what you can expect to pay.

To verify the information, you will send a series of estoppels. These are letters that are sent to a tenant to verify the terms of a lease. They will help you discover any side arrangements that may have been made that could prevent you from collecting full rent or even alert you to the fact that should you begin to enforce the terms of a lease, a tenant will have to be evicted.

Sending estoppels is a vital part of the income verification process. Work with your attorney to make sure that you are sending them in the appropriate format and at the proper time in the evaluation process.

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