What is a Tenant Estoppel Certificate?CASAPLORERTrusted & Transparent
An estoppel certificate is a document that confirms the terms of your lease. Your landlord might ask you to sign an estoppel certificate in order to have proof of the conditions of your lease. An estoppel certificate is used by your landlord to show potential mortgage lenders or property buyers that you, as a tenant, promise to make monthly rent payments.
What does an estoppel certificate contain?
A tenant estoppel certificate contains the entire terms of your original lease agreement, along with any modifications, outstanding obligations, or additions that might have been made since then. The terms in the estoppel certificate will replace your residential lease agreement.
For example, your lease agreement might prohibit any pets within your unit, however, your landlord might have verbally given you permission to have pets. When it is time to sign an estoppel certificate, you and your landlord will need to document this change in the estoppel certificate.
The estoppel certificate will also include outstanding obligations or claims against the landlord. If the stove that came with your unit has broken and your landlord has promised to replace it, the estoppel certificate will include this claim for a replacement stove.
Including the terms of your lease along with any obligations will allow third parties that use the estoppel certificate to get the full picture and value your lease accurately should they choose to purchase or lend money to your landlord. Signing the certificate means that you agree to the information that the landlord has provided to these third parties.
Do I have to sign an estoppel certificate?
Your lease agreement might have a clause that requires you to sign an estoppel certificate if your landlord requests you to do so. Refusing to sign an estoppel certificate may breach the terms of your lease agreement, resulting in default or financial penalties. In other cases, not responding to a request to sign the certificate might allow the landlord to sign the estoppel certificate on your behalf as an attorney-in-fact, or a non-reply is the same as agreeing to the terms laid out in the certificate.
An estoppel certificate isn’t a bad thing, but you do need to make sure that it accurately reflects the conditions of your current lease agreement, including your start and end lease dates, rent, security deposit, and other responsibilities. Compare the estoppel certificate with your lease agreement to see if it matches. If you notice any discrepancies, contact your landlord.
Estoppel Certificates for Commercial Real Estate
Estoppel certificates are used for both residential and commercial properties. A commercial real estate owner might ask their commercial tenants to sign an estoppel certificate to set in stone the terms of their leases. This makes it easier to apply for a commercial mortgage or when negotiating with investors looking to purchase the property, as they can then properly assess the condition of the property’s leases.