All Forum Posts by: Jarrod M.

 I agree with your attorney 100%

Does anyone here put a deadline in their offers?  Something like .... "This offer is valid until 5pm on ________".  I see this a lot in the commercial context, but I'm wondering if it would fly in the residential context or if it would be off-putting.  

It would give you an excuse to follow up if the deadline is approaching, but @Jim Viens approach is probably more effective.

 I'm not sure but my guess would be that the subordination language in the estoppel would not be enforceable under the Act.  Assuming the Act protected that particular tenant, the Bank would have to argue that the tenant waived its rights under the Act.  Even if it is waivable, the Act isn't even mentioned in the estoppel.  All the more reason to believe this was the Bank's commercial estoppel form.

No way I would sign that estoppel either!

 I think Sam is right about terminating the leases.  Details in each state will vary, but generally speaking if a lease is subordinate to a mortgage and the lender forecloses, then the lease would terminate at the lender's option.  It is not unlike a junior mortgage in that regard.  This is one reason why the subordination language in the estoppel is a little concerning.  Typically, a tenant would agree to subordinate the lease to the mortgage and attorn to the lender as new landlord in exchange for the lender's agreement not to disturb the tenant's rights under the lease.  These are each of the 3 main components of the SNDA, which will then carve out certain items that the new lender/landlord is not responsible for (primarily any prior landlord defaults).  The NDA part was absent in the language in this estoppel.

Since I'm pontificating, I'll point out that it's a totally separate question, and even more state specific, whether a tenant is already subordinate to the mortgage.  In some states, absent an agreement otherwise, the first person/entity with rights to the property is superior to any rights acquired by other parties after the fact.  So, if a tenant is in place and a new mortgage is put on the property, absent an agreement otherwise, the tenant is superior.  This is not always true and will depend heavily on what's in the written lease agreement (a tenant may agree up front in the lease to subordinate to all future mortgage) and will depend on state-specific lien priority law. Some states look to see which document is recorded in the land records first, others pay more attention to which party had notice of the other.  Several states are a hard-to-decipher mix of the two.  

Hopefully this is more helpful than confusing.

 @Sam Leon Nice work! Glad to hear you got to a good outcome. Good luck with the rest of the closing.

Hello from the other end of the Red Line.  Welcome to the site!

Jarrod

@Sam Leon Has your Bank told you that these estoppels must be signed without changes in order for the Bank to close?  In the commercial context, tenants will revise estoppels routinely (bigger tenants anyway), especially when they include things like item #4 which are really more appropriate in an SNDA.  Depending on how many tenants we're talking about here, the Bank may also agree to accept some of them post-closing, so long as you agree to try to get them.  That might relieve some of the time pressure you are feeling.

It sounds like you'll need to wear your friendly landlord hat like @Marcia Maynard suggests to try to get the tenants comfortable.  At the same time also wear your sophisticated Borrower hat and talk about realistic options with your Bank.  Since you have something signed from the tenants, the Bank is not totally exposed here.  Figure out what's absolutely necessary for them to fund and what's just the Bank's closer just checking items off a list.

 It is admittedly something that is much more common in a commercial lease, but given the discussion here in this thread it might make sense to include in a residential lease.  

I've seen this kind of language in commercial tenant estoppels and the commercial tenants with any clout will not sign.  Most of this language is what you would see in a subordination, non-disturbance and attornment agreement.

What do the leases say about the tenant's obligation to sign an estoppel?  If they are only required to sign estoppels that are "customary" or "reasonable" then that can be your leverage point with the Bank.  The Bank should be able to protect its interest in the property, but that doesn't mean they can re-write the leases.  These likely would "trump" the leases.  In fairness though, the leases may already say these types of things, so the tenants may not really be given up much.

I have an additional thought to add since you mentioned the goal of doing the LLC interest transfer is to save on closing costs. Each state is different and I'm not sure of the particulars of Maryland law, but equity transfers can sometimes inadvertently trigger a transfer tax even though no deed is recorded. An equity deal will not involve the fee to record documents with the land records, but transfer taxes may apply and can be a big chunk of closing costs. There is no uniformity whatsoever state to state on how the legislature decides to handle this, so this is just another reason to have any attorney structure this properly to meet the goals you have in mind.