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Posted: July 9, 2016

Purchaser Cannot Rely on Tenant Estoppel Certificate it Knows to Be Contrary to Fact

On June 27, 2016, Justice Ash of the Kings County Commercial Division issued a decision in Flatbush Portfolio SPE, LLC v. Taro Sushi N.Y. Inc., 2016 NY Slip Op. 31207(U), holding that a purchaser could not rely upon an estoppel certificate signed by a tenant, explaining:

In the context of a commercial lease, an estoppel certificate will be enforced unless the certifying party can show a defense to the making of the document, such as fraud or duress or that the assignee accepted the certificate with knowledge of the contrary, and true, state of facts.

Here, it is undisputed that the RedSky Entities reviewed the lease at issue and were aware that it contained a lease renewal option. Further, that the RedSky Entities knew the lease had not been modified. In fact, the Estoppel Certificate, which the RedSky Entities rely upon, states clearly, in paragraphs (1) and (2), that the lease is in full force and effect and that there are no amendments, supplements or modifications of any kind to the Lease except as set forth on Schedule I. The word “NONE” is written out in Schedule 1. Thus, the RedSky Entities’ reliance on the Estoppel Certificate to preclude Taro Sushi from exercising its option to renew is unreasonable and contrary to what they knew to be the true state of facts. In this regard, Taro Sushi has established its defense and the Estoppel Certificate cannot be enforced against Taro Sushi with respect to its option to renew.

(Internal quotations and citations omitted) (emphasis added).

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