Tenants will be supplied with an estoppel agreement/certificate for signature by their landlord prior to the transfer of ownership of an office property. There is frequently a time limit for returning the signed tenant estoppel certificate/agreement, as well as pressure from the landlord to sign it. Tenants, on the other hand, would be advised to thoroughly review the estoppel agreement and confirm its authenticity before mindlessly signing the documentation filed. Here let’s see what this document is all about and when you should sign it.
What is a Tenant Estoppel Certificate?
A Tenant Estoppel Agreement is a legal term that refers to a contract between a landlord and a tenant.
Estoppel is defined by the dictionary as “the principle that prevents a person from saying something contrary to what is suggested by that person’s past action or statement by a previous applicable judicial ruling”. As a result, the concept of an estoppel certificate relates to a legal document that reveals a previous agreement with another party.
A tenant estoppel certificate (also known as a “tenant estoppel,” “estoppel letter,” or “estoppel agreement”) is used in real estate as a lease obligation when the landlord wants to conduct business with a third party. A tenant estoppel certificate is required, for example, if the landlord intends to sell or finance the property in which a tenant currently resides. An estoppel agreement is in effect on nearly all commercial real estate property. This includes retail complexes and factories. The renter will sign an agreement outlining all details of their lease and other arrangements.
What Does a Tenant Estoppel Letter or Certificate Contain?
While the specific components required in tenant estoppel vary, the following are some common points mentioned in a typical tenant estoppel letter or certificate:
- Dates: The estoppel agreement will specify when the lease will begin and end. It will also include any lease renewals or extensions, the dates they occurred, and when the next renewal is due.
- Rental Amounts: The amount of rent paid each month will be specified in the tenant estoppel form. It will also reveal any past-due payments and how much money is being held as a security deposit.
- Contact Information: The estoppel will identify the tenants and offer contact information for all parties, including residential addresses, phone numbers, and email addresses.
- Full Force and Effect: If any changes were made to the initial tenancy agreement, they will also be reflected in the estoppel. In this situation, the lease would also say that it is still in full force and effect.
Most leases include a provision requiring tenants to furnish a tenant estoppel letter or certificate upon request; however, the specifics of what should be included in the tenant estoppel certificate can vary. The items listed above are usually a good place to start.
Should I Sign a Tenant Estoppel Agreement/ Certificate?
If the written lease requires the renter to sign an estoppel certificate, the tenant must do so. Refusing to complete estoppel if the lease requires a tenant to do so is a breach of the lease. Because this phrase is common in leases, it is critical that a renter analyze the lease before choosing whether or not to fill out an estoppel certificate.
If your lease requires you to complete an estoppel certificate, it will also specify how many days you have to do so. Examine this lease provision carefully because a tenant usually only has a few days to complete an estoppel certificate and send it to the landlord.
A tenant who fails to complete an estoppel certificate as required under a lease may be evicted for breach of the lease agreement. A tenant is not needed to execute and sign an estoppel agreement in the absence of a lease provision. However, in many cases, even if the lease does not require it, it is in the tenant’s best interest to fill out and sign the tenant estoppel certificate.
What Does an Estoppel Certificate Do?
An estoppel certificate informs a potential buyer or lender of a real estate property about the tenant’s rights and privileges as agreed upon in the tenancy document. It validates the existence of a lease, the absence of any defaults, and the payment of the agreed-upon rent until the expiration date. This accomplishes three important goals:
- Gives a prospective buyer or financial lender adequate information about the existing situation to determine whether the deal will benefit them.
- Provides assurance to the purchaser or lender that the renter will not make later appeals and demands that contradict the assertions in the estoppel certificate.
- Protects the tenant’s rights and privileges, particularly where verbal agreements were established directly with the landlord and were not included in the lease.
When Is it Appropriate for a Tenant to Sign an Estoppel Certificate?
In many circumstances, a tenant may prefer to complete an estoppel certificate even though it is not required because it may benefit them. When verbal agreements were formed outside of the limits of the initial lease, a tenant may desire to do this. Here are several examples:
- The landlord permits the tenant to keep a pet on the premises.
- Agreements regarding the inclusion of electric expenses in rent payments
- Without prior approval, you have the right to sublet any of the rooms.
- Any interest accrued on the security deposit maintained by the landlord.
- Free use of garages, storage spaces, and parking spots.
- Permission for the tenant’s housemates to live with him or her.
- Use of specified regions, such as a backyard, on an exclusive basis
- Building maintenance agreements in exchange for lower rent
As part of the estoppel agreement, all of the above verbal agreements would need to be written down. As a result, even if the property is sold to a third party, the tenant retains these legal rights. It aids in the preservation of these agreements in the event of a change in property ownership. However, if a tenant estoppel form is not signed, the renter may lose these rights and benefits if new management takes over.
What Are the Potential Consequences of Signing an Estoppel Certificate?
There are no real risks to signing a tenant estoppel agreement as a renter because it protects their privileges and rights when the property they are renting is refinanced or sold to a new buyer. However, the paper must be carefully prepared to avoid problems. For example, all lease revisions and side agreements must be clearly specified to avoid them being withdrawn at a later date. Legally, the tenant does not have the right to these benefits if they are not included in the lease. This omission in the agreement could result in a renter losing some of their rights or being evicted from the property early.
Furthermore, an estoppel agreement is only risk-free if the information contained within it is true and proper. A tenant may be sued if they knowingly provide misleading and erroneous information that is contradictory to the conditions of the lease. As a result, any renter who is required or decides to file an estoppel certificate must do so with extreme care and accuracy. Check any information that is already stated in the lease to see if it will also be included in the estoppel agreement. This might lead to uncertainty if filled out improperly. In addition, make a list of all necessary documents, such as the lease and its revisions, to verify that no information is left out.
What Happens If A Real Estate Agent Doesn’t Send The Estoppel Certificate To Prospective Buyers?
Realtors are required to present all estoppel certificates to prospective buyers. 2079.16 of the California Civil Code, In addition, a buyer can sue a seller or real estate agent who submits an incorrect estoppel agreement for damages. Linden Partners v. Wilshire Linden Association, 62 Cal. App. 4th 508, 531 (1998).
While this arrangement poses a dilemma for the buyer, seller, and agent, the renter will face no culpability as long as they met their obligation by correctly and accurately completing the estoppel certificate. However, if a question arises, it is better to speak with an experienced tenant attorney.
Tenant Precautions
If there is a conflict between the Estoppel Agreement and the lease, the Estoppel Agreement is the “leading” light. The most recent document, which is the Estoppel Agreement, will generally take precedence.
Given the importance of the Estoppel Agreement, it is surprising that the writing of the agreement frequently falls on the least skilled member in a company, creating a platform for incorrect comments. Tenants’ rights that have been bargained may be neglected, such as the first right of refusal, a renewal option, or tax concessions from a sale to a tenant.
Tenants must thoroughly evaluate any submitted Estoppel Agreement to ensure its accuracy and that the safeguards provided in their leases are represented in the Estoppel.
A few court statements, courtesy of Kyle B. Marks of the Richard D. Marks Professional Corporation:
- “The contents of an estoppel certificate are believed to be accurate and bind both the Landlord and Tenant, even if they are incorrect.” First Mountain Bank v. Plaza Freeway Ltd. P’ship (2000) 81 Cal.App.4th 616, 628
- “Where there is a discrepancy between the estoppel certificate and the Lease, courts will read the lease and the estoppel together to resolve the issue.” Miner v. Tustin Avenue Inv’rs, LLC, 116 Cal.App.4th 264, 271 (2004); California Evidence Code Section 622.
- “The Court has decided that the contents of an estoppel certificate are presumed conclusive, and that to hold otherwise ‘would contradict the purpose behind the widespread use of estoppel certificates.” The Plaza Freeway, exit 628.
Conclusions
On the surface, an estoppel real estate document appears to be a relatively innocuous legal certificate that describes the agreements between a tenant and a landlord. It does, however, serve a crucial function when third parties are involved, such as when the property is sold or financed. It offers all important information to the prospective buyer or lender and aids in the protection of the tenants’ rights.
However, if such certificates are not prepared correctly, they can pose problems to the renter or landlord. Even if it contains incorrect information, the document is legally binding and supersedes any previous written agreements. As a result, tenants and landlords must constantly exercise caution while executing these papers in order to protect both parties’ rights and responsibilities.
Tenant Estoppel Certificate FAQs
Is an estoppel legally binding?
An estoppel certificate is a legally enforceable document in which a tenant certifies or pledges that certain aspects of its lease or rental agreement are correct.
What is estoppel in real estate?
In commercial real estate, tenant estoppel is a document signed by a tenant that certifies the terms, conditions, and status of the lease they have agreed to.
How do you argue estoppel?
The prosecution history must “evince a clear and unmistakable surrender of subject matter” under argument-based estoppel. “Whether a competitor would reasonably assume that the applicant had ceded the relevant subject matter” is the relevant inquiry.
What is the difference between estoppel and waiver?
A waiver differs from estoppel in that the important ingredient in the waiver is real intent to abandon or surrender right, but in estoppel intent is immaterial. The required condition is that the other party is harmed as a result of the estopped party’s actions.
