A dirty estoppel is much like a Dirty Martini, except it packs a much bigger hangover if not properly digested.
On almost all major commercial real estate transactions today, a buyer will get few if any representations on the leases other than a statement that all of them have been delivered as well as a rent roll.
Instead the buyer will seek comfort on the estoppels to be delivered by the tenants (the figurative horse’s mouth) who in theory are making representations directly to the buyer and their lender and implicitly releasing vendor from past claims (enhanced by having the estoppel addressed to the vendor as well).
In Disneyland one would get clean estoppels from all tenants portraying an Elysium of happy tenants.
Of course not all rides at Disney end with the same level of ecstasy and some carry a few surprises.
Same thing with Martinis and estoppels.
Estoppels are manna from heaven for certain tenants seeking to settle old scores or at least resurrect or embellish old grievances given the leverage afforded them by the estoppel importance of which they are mostly fully aware.
While most transactions do not require estoppels from all tenants,they will be required from major tenants and often require the vendor to provide one in lieu of the tenants who do not provide same.
Knowing that the alcohol content of the dirty martini might exceed expectations or legal limits, what is a well intentioned and prepared estoppel reveller to do?
Once the form and scope of the desired estoppel levels ascertained, the estoppels are prepared and populated with the required information and sent out to tenants for execution. Short of anticipating in the purchase agreement levels of claims that would be acceptable per tenant and in the aggregate (which would then be subject to a holdback allowing vendor to continue to contest or straight out credit to buyer), the parties will have to asses the nature and extent of the claims and agree on appropriate holdback/credit mechanisms.
There usually are no surprises but like someone said “Life is like a box of chocolates-you never know what you will find inside”.
Hopefully most will find sweet chocolates but for those who wake up with a hangover, take two aspirins and call your lawyer.