Buyer should seek estoppel letter from building tenants
Q. I am looking into purchasing an apartment building for the first time. I have been doing research on the subject and often I see it is recommended that I obtain estoppel letters. What is an estoppel letter and is this necessary for my purchase?
A. An estoppel letter is a binding representation by a tenant regarding his or her rent, security deposit and lease duration. When you purchase the building, the seller will provide a rent roll, which will indicate the name of each tenant, amount of rent and security deposit and when the lease terminates, presuming there is a written lease. These figures are used at closing to calculate rent and security deposit credits.
For example, say you are purchasing a 12 flat and each apartment takes in $1,000 in rent and each tenant has put up a $1,000 security deposit. If you close your deal on March 15, you, as purchaser, would be entitled to a $6,000 rent credit (half the full month rental income) and a $12,000 credit for the security deposits. As each tenant vacates, presuming no issues, their $1,000 security deposit is returned.
Now, say your rent roll indicates the seller has not collected any security deposits and you do not receive a security deposit credit from the seller. Three months later, your first tenant moves out and asks for his $1,000 security deposit back. You respond saying your seller represented to you that the tenant had no security deposit. Presuming the tenant can establish he paid a security deposit to the prior owner, you now owe the tenant $1,000.
The way an apartment building purchaser protects him or herself from this situation is to request estoppel letters from the tenants. Here, each tenant represents, in writing, what his or her rent and security deposits are. Now, you have a written record from each tenant that you can rely upon when the tenant vacates.
As to the question of whether or not this is necessary, I don't believe any lender will require this, so necessary is probably not the correct word. However, if you wish to protect yourself from the above scenario, estoppel letters are generally a very good idea.
Q. My mom passed away last summer with a will, which named me executor of her estate. I opened the estate myself and I have been appointed executor by the court.
My mom's only asset was her house which I am trying to sell. Her will says upon the sale of the house, 75% of the proceeds from the sale go to me and 25% to my brother. My brother is not happy with this arrangement and is threatening to stop the sale and have me removed unless we divide the sales proceeds 50/50. Can he do this?
A. Presuming you followed all the statutory and local requirements in having yourself appointed executor and followed up after the appointment with the required notices, you most likely have the power to sell the property and you are required to disburse the sales proceeds per the terms of the will. If brother objected to you becoming executor, he should have taken appropriate action to contest your appointment. His time to contest the provisions in the will has also likely passed, as he failed to contest prior to the will be admitted into probate.
That said, he could still hire an attorney and at least attempt to make a mess of things. I would suggest contacting an experienced probate attorney and review what has occurred to date. If he or she agrees you have taken all appropriate steps to this point and you are on solid legal ground, perhaps you could contact your brother and attempt to find a percentage you both can live with. This would probably make next Thanksgiving less uncomfortable.
• Send your questions to attorney Tom Resnick, 910 E. Oak St., Lake in the Hills, IL 60156, by email to email@example.com or call (847) 359-8983.