What follows is our general observations and opinions. It is not legal advice, and it is not a definitive statement of California law. Every situation depends on its own facts.
Two documents arrive from your landlord with a note asking you to sign and return them within ten business days. One is an estoppel certificate. The other is a subordination, non-disturbance and attornment agreement, usually shortened to SNDA. Both look administrative. Neither is.
The short version: an estoppel certificate is a statement of facts about your lease that you will be held to later, and its function is to stop you from contradicting it. An SNDA governs what happens to your tenancy if your landlord’s lender forecloses. In our experience the estoppel is the one that causes the most damage, because tenants treat it as paperwork and sign it without checking, and it is the one document where getting a detail wrong can cost you a right you actually negotiated.
What an estoppel certificate is doing
A buyer or lender doing diligence on a commercial building does not want to rely only on the seller’s word about the leases. So they ask each tenant to confirm, directly, the basic terms: that the lease is in full force, what the current rent is, what the term and remaining options are, how much deposit is held, whether there are unpaid landlord obligations, and whether either party is in default.
The word “estoppel” is the point. Once you have certified those facts and a third party has relied on them in buying the building or making the loan, our reading is that you will generally be prevented from asserting something inconsistent later. If you certify there are no outstanding landlord obligations and the landlord in fact still owes you forty thousand dollars of unpaid tenant improvement allowance, you have a serious problem — and you created it yourself.
What we check, every time, against the actual lease and the actual file:
- The rent and escalation figures. Landlord-prepared forms are drafted from the landlord’s rent roll, and rent rolls carry errors.
- Options. Renewal options, expansion rights, rights of first refusal and exclusivity all need to be listed. An estoppel that omits your renewal option, signed by you, is a gift to a buyer who would rather you left.
- Deposit and any letter of credit. Including any burn-down that has already occurred.
- Outstanding landlord obligations. Unfinished work, unpaid allowance, promised repairs, unresolved operating-expense reconciliations. This is the line that matters most.
- Defaults and claims. Do not certify “no defaults and no claims” if you have a live dispute. Disclose it.
- Side letters and amendments. Every one of them should be listed. A side letter nobody attached is a side letter that may effectively disappear.
Landlord forms also frequently ask the tenant to make forward-looking promises rather than statements of fact — agreeing to give the lender notice and cure rights, or waiving offset rights. Our view is that those belong in an SNDA where they can be negotiated, not smuggled into a certificate of existing facts.
Where the obligation to sign comes from
Most commercial leases contain an estoppel clause requiring the tenant to deliver a certificate within a stated period. Some go further and provide that failure to respond is deemed to be a certification that everything in the landlord’s draft is correct, or appoint the landlord as the tenant’s attorney-in-fact to sign it.
That deemed-approval mechanism is worth taking seriously, because it means ignoring the request is the worst available option. If the draft is wrong, the answer is to return a corrected version promptly and in writing, not to let the clock run.
At lease negotiation stage, the provisions worth pushing for are a realistic response window, a right to qualify statements to your actual knowledge, reciprocity so the landlord will sign one for you, and removal of any deemed-approval or attorney-in-fact language.
What an SNDA is doing, and why the middle word is the one you care about
An SNDA has three moving parts, and they do not all work in your favor.
Subordination places your lease behind the lender’s deed of trust in priority. This is what the lender wants. Many leases already contain an automatic subordination clause, which means the tenant has often given this away before the SNDA arrives.
Non-disturbance is the tenant’s protection and the reason to engage at all. Without it, our reading is that a lender foreclosing on a lease junior to its deed of trust may be able to terminate that lease — meaning a tenant who has done nothing wrong, and has spent heavily on a build-out, can lose the space. Non-disturbance is the lender’s promise that so long as you are not in default, your possession and your lease terms continue after a foreclosure.
Attornment is your agreement to treat whoever ends up owning the building as your landlord. That is generally reasonable and is the trade for non-disturbance.
The negotiation is therefore not really about whether to subordinate. It is about not subordinating without getting non-disturbance in return.
The carve-outs lenders ask for, and which ones matter
Even a non-disturbance provision usually comes with a list of things the successor owner will not be bound by. Common ones: prepaid rent more than a month in advance, a security deposit the lender never actually received, offsets or defenses against the prior landlord, obligations to complete construction or fund a tenant improvement allowance, and amendments made without lender consent.
Read that list against your own deal. If your economics depend on an allowance the landlord has not yet paid, a blanket carve-out for construction obligations may hand you a lease you cannot afford to perform. If you hold a large cash deposit, the deposit carve-out is worth negotiating. And if you have a termination or offset right you fought for, a carve-out that erases it against a successor is worth pushing back on.
Why this comes up so often in Los Angeles right now
Refinancing activity on older Los Angeles commercial stock has been steady, and lenders request estoppels and SNDAs at every refinance as well as every sale. For tenants in the kind of mid-century single-story retail and low-rise office product that fills the corridors here, these documents arrive more often than they used to, frequently with short deadlines attached. Treating each one as a two-minute signature is how a negotiated right quietly disappears.
How we work on these
Reviewing an estoppel certificate or an SNDA is hourly or flat-fee work, and it is usually a small engagement — we normally quote a flat fee, because the document is short and the lease is the thing that takes the time. This is not contingency work and we would not present it as such. The cost of the review is ordinarily a fraction of the value of a single renewal option.
If one of these has landed on your desk with a deadline on it, send it over with your lease and we will read both. Call us at (310) 556-9692.
Related reading: our commercial lease review resource page, plus what to negotiate in a letter of intent, assignment and subletting provisions, and what a personal guarantee commits you to.
These are our general observations and opinions only. They are not legal advice and not a definitive statement of California law, every situation turns on its own facts, and reading this does not create an attorney-client relationship between us.
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