What is a Tenant Estoppel Certificate?CASAPLORERTrusted & Transparent
What You Should Know
- An estoppel certificate states the terms of your lease, along with any additional agreements and amendments
- It’s often requested by your landlord if they are looking to finance or sell the property so that the lender or purchaser has confirmation of existing leases
- Your lease agreement can require you to sign an estoppel certificate if requested by your landlord
- Since it is legally binding, It’s important to carefully review and make amendments to the estoppel certificate before signing to make sure that it is accurate
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 Mean?
In law, estoppel stops someone from claiming something else that goes against what they claimed previously. In the case of an estoppel certificate, it prevents the tenant and landlord from claiming a different set of facts from what is written on the estoppel certificate. This makes an estoppel certificate a binding document that can be used to confirm the terms of a lease. However, while an estoppel certificate confirms the terms of a lease, it does not replace a lease agreement. The lease, which is a contract, is through your lease agreement.
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.
As a summary, an estoppel certificate will contain:
- Monthly rent amount
- Security deposit amount
- Lease start and end dates
- Any amendments to the lease
- Defaults or claims
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.
If your lease agreement doesn't specifically state that you must sign an estoppel certificate, then you do not have to sign it. However, an estoppel certificate is beneficial to both you and your landlord, and not signing it means that you might lose some protection of your rights and claims should a dispute arise that involves the terms of your lease.
Uses of Estoppel Certificates
The purpose of an estoppel certificate is that it preserves the terms of your lease, along with any verbal agreements that you have had with your landlord. Did you know that even members of the U.S. Congress may need to sign estoppel certificates, with the U.S. House of Representatives providing guidance to members on how to deal with estoppel certificates? Your landlord will commonly ask for an estoppel certificate to be signed if someone is looking to purchase the property from the landlord. While the property is being sold to a new owner, your existing lease agreement still stands. By clearly defining the terms of your lease, an estoppel certificate gives the purchaser of the property a clear picture of what they are purchasing and will need to recognize.
For example, let’s say that your lease agreement doesn’t allow pets in the building but your landlord has given you verbal permission to have pets in your unit. If the landlord changes, the new landlord won’t know about your verbal agreement with your previous landlord, since they only have the written lease agreement. You won’t have much proof to back up your verbal agreement either. If you had signed an estoppel certificate, then you would have been able to add that you have permission to have pets in your unit, with it being mutually agreed upon with your landlord. This is an example of how an estoppel certificate can be used for agreements that contradict what your lease agreement says.
Another use of estoppel certificates is to confirm things that are not in your lease agreement at all. For example, your lease agreement might not have a clearly defined termination date. With an estoppel certificate, you and your landlord can agree on a termination date, with possible options to extend your lease. This prevents ambiguity and disputes in the future.
Are there risks to signing an estoppel certificate?
While an estoppel certificate is meant to protect both you and your landlord, you’ll need to make sure that you carefully review the estoppel certificate before signing to make sure that it is accurate. Should a dispute arise, the terms of your lease that is on your estoppel certificate will be upheld, while your lease agreement will only be used if there are ambiguities on your estoppel certificate. If you don’t carefully look over your estoppel certificate before signing, you might be agreeing to changes to your lease.
You do not need to sign the estoppel immediately. Instead, you are usually given a number of days to sign it. This period can be as long as 30 days, but can be as short as a few days. During this time, and before signing the estoppel certificate, you should compare it with your current lease agreement. If there are any differences between them, you should bring it up with your landlord and have it sorted out before signing. If you had any verbal agreements with your landlord that do not appear on your estoppel certificate, you should also make sure to have them added. If you’re a tenant, you might want to get legal advice before signing.
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.
If your landlord is applying for financing, such as a commercial mortgage, then their lender may request for estoppel certificates from tenants. Estoppel certificates can act as a proof of cash flow, since it verifies that a tenant is current on their lease agreement and for a stated amount.