Party Cannot Enforce Estoppel Certificates it Accepted Knowing that the Representations Were Not True

On June 5, 2018, the First Department issued a decision in Aerotek, Inc. v. 757 3rd Ave. Associates, LLC, 2018 NY Slip Op. 03943, holding that a party could not rely on an estoppel certificate it accepted knowing that it was not true, explaining:

Plaintiffs seek to recover tenant improvement costs pursuant to two leases. Defendant landlord and seller, 757 3rd Avenue Associates, LLC, argues that plaintiffs are estopped to assert their right to reimbursement because they executed tenant estoppel certificates stating that defendant 757 was not in material default of the leases and that they had no further rights to receive landlord contributions for tenant improvements. Since the tenant estoppel certificates state that they are being made with the knowledge that defendant 757 (among others) will rely upon them, defendant 757 is an appropriate party to seek to enforce these certificates.

However, the complaint alleges that defendant 757 was aware of the reimbursement request beginning in December 2014, and that from that date until April 2015, when it received the tenant estoppel certificates, plaintiffs took no action to suggest that they were withdrawing their reimbursement request or that they were willing to forgo payment. Accepted as true for purposes of this motion to dismiss, the allegations of the complaint show that defendant 757 cannot enforce the estoppel certificates, because it accepted them knowing the contrary, and true, fact that plaintiffs were still seeking reimbursement for the improvement costs.

(Internal citations omitted) (emphasis added).

We frequently litigate disputes over the purchase and sale of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.