Tenants will be presented with an estoppel agreement for signature by their landlord; prior to the transfer of ownership of an office building. There is frequently a time limit for returning the signed estoppel agreement; as well as pressure from the landlord to do so. However, instead of blindly signing the paperwork submitted, the tenant should carefully review the estoppel agreement and confirm its accuracy. What exactly is a tenant estoppel certificate in California and Florida, and its form, and why is it so important?
What is a Tenant Estoppel Certificate?
When a landlord lists a rental property for sale, the real estate agent or landlord will frequently request; that the tenants fill out and sign a document known as a Tenant Estoppel Certificate. A tenant estoppel certificate is use to inform a potential buyer of commercial or residential rental property of existing tenants’ rights and privileges. The tenant estoppel certificate requests information on the rental amount, lease terms, protected tenancy status, oral agreements with the landlord; amendments to written lease agreements, promises made by the landlord, and agreements regarding utility payments, such as water and gas.
When Is It Necessary for a Tenant to Sign an Estoppel Certificate?
The execution and delivery of a tenant estoppel certificate is usually govern by a specific clause in the lease. Typically, such a provision states:
If the landlord requests an estoppel certificate from the tenant at any time; the tenant agrees to sign and deliver it to the landlord or its representative. The estoppel certificate will say that the lease is in full force; effect and that the landlord is not in default hereunder. It will also say when the lease will end and what other things the landlord; needs to know about the lease.
The contents of a tenant estoppel certificate, which is supposed to be sign a tenant; are usually no more detailed than what the lease term regarding the obligation requires. Frequently, a landlord will request a list of topics to include in the certificate that goes above and beyond; the requirements of the lease. If such a request is put in place, the tenant council may want to consider limiting; the statements in the certificate to what is required; or qualifying the accuracy of the extra terms if the possibility of changed circumstances exists down the road.
What Is the Purpose of a Tenant Estoppel Certificate?
The purpose of a tenant’s estoppel certificate is usually twofold; (1) to provide accurate information about the lease and the leased premises to a prospective purchaser or lender; (2) to provide assurance to the purchaser that the tenant will not make claims that are inconsistent; with the statements contained in the estoppel certificate at a later date. The latter purpose, if not carefully addressed, can cause problems.
Is It Necessary for Me to Complete a Tenant Estoppel Certificate?
If the written lease requires the tenant to sign an estoppel certificate, the tenant must do so. Refusing to complete estoppel where the lease requires a tenant to do so is a breach of the lease. Because this clause is common in leases, it is critical that a tenant review; the lease before deciding 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. It’s important to read this part of the lease very carefully because; the tenant usually only has a few days to fill out an estoppel certificate and send it back.
A tenant who fails to complete a tenant estoppel certificate as required by a lease; may evict for breach of the lease agreement. A tenant is not require to complete 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 an estoppel certificate.
Tenant Estoppel Certificate Form
The estoppel certificate form is used when selling a property that is currently occupied; by one or more tenants for either residential or commercial purposes. It is typically required by the purchasing party’s lender in order to proceed with the property financing. A tenant estoppel certificate form describing the details of their current rental contract must be completed by each tenant. Some of the vital details that will need to be on the tenant estoppel certificate form are:
- Both parties’ identities (landlord and tenant)
- Property type (residential or commercial)
- The lease’s term (start and end dates)
- Rent
- The security deposit amount
Once the necessary fields on the tenant estoppel certificate form is fill; the document must be signed and dated in the presence of a notary public for certification purposes. The form can then be submitted to the third party, along with copies of the last three rent payments; as proof of a legitimate tenancy.
The form of tenant estoppel certificate by type
- Commercial Tenant – Adobe PDF
- Fannie Mae – Adobe PDF, Microsoft Word (.docx)
- Month-to-Month Tenant – Adobe PDF, Microsoft Word (.docx)
- National Association of Realtors (NAR) – Adobe PDF
- Residential Tenant – Adobe PDF, Microsoft Word (.docx)
Read also: DEFERRED SALES TRUST: Complete Guide In 2022
Tenant Estoppel Certificate Florida
The Florida Legislature passed a bill in 2017 that changes the rules and fees for a tenant estoppel certificate.
When selling a home or condominium unit in a community association, property owners must contact the association to obtain an estoppel letter. The Florida Condominium Act and Homeowners Association laws both specifically address a tenant estoppel certificate.
A tenant estoppel letter or certificate is to facilitate a closing by providing a snapshot of the fees or assessments that a seller may owe to their association. In Florida, purchasers are jointly and severally liable with the previous owner for association dues and assessments. In most cases, the seller has paid their community association dues and assessments on time.
Related Articles: A Guide to Sewer Scope Inspection 2022: Overview and Importance
Senate Bill 398 of 2017 amended Florida Statutes to limit the amount that a community association or community association management company may charge for the preparation and delivery of a tenant estoppel certificate. The following is the new maximum fee structure:
- The association may charge no more than $250 for non-delinquent accounts.
- The association may levy a late fee of up to $150 on delinquent accounts.
An estoppel certificate must also be provided in the same format across the state; so that both buyers and sellers have the information they need to complete the real estate deal. If delivered electronically, estoppel certificates are valid for 30 days from the date of delivery. If delivered by mail, estoppel certificates are effective for 35 days.
Tenant Estoppel Certificate California
Tenant estoppel certificate is given even more weight in California courts than in other jurisdictions. The landlord-plaintiff and the defendant tenant in Plaza Freeway Limited Partnership v. First Mountain Bank, 81 Cal.App.4th 616 (2000) were successors-in-interest to the original landlord; tenant under a 25-year commercial real estate lease. Before the plaintiff bought the real estate, the defendant signed; delivered an “estoppel certificate,” which said that the lease would end on October 31, 1998.
When the defendant failed to exercise a lease renewal option on time and did not vacate the premises; the landlord filed an unlawful detainer/eviction action against the tenant. Despite the tenant’s estoppel certificate, the trial court determined that the initial lease term’s expiration date was eight months later. The court of appeals reversed, ruling that the tenant’s estoppel certificate was a “written instrument” for evidentiary purposes under California law, and the tenant was estoppel from contradicting the tenant estoppel certificate on October 31, 1998.
Related Articles: HOLDOVER TENANT: Definition & All You Need To Know
A contrary conclusion would defeat the purpose of the widely used estoppel certificates. The court of appeal in California emphasized the breadth of issues affected by a tenant estoppel certificate, opining that estoppel certificates are equally critical to landlords because they affect their ability to sell commercial real property and secure financing.
Estoppel certificates provide prospective buyers and lenders with information about the lessees’ understanding of the lease agreement. By providing independent verification of the presence or absence of any side deals; Estoppel certificates prevent unwelcome post-transaction surprises that could negatively affect the building’s income stream; such as has the tenant paid any rent in advance? What is the tenant’s interpretation of the lease provisions? Are there any changes or amendments? Has the landlord completed all the requested improvements? Are there any sublease agreements or assignments? Is the tenant financially secure?
What Are the Consequences of Signing an Estoppel Certificate?
In most cases, a properly completed estoppel certificate poses no risk to the tenant. However, if the estoppel certificate is incorrect and describes rights that are in conflict with the lease terms; a problem may arise. Because an estoppel certificate is a legally binding document; it should not contain provisions that are inconsistent with or inaccurate with respect to the lease. To avoid these problems, a tenant should be very careful to make sure; that every word in the estoppel agreement is correct and complete. A tenant should object to any provision that modifies or limits their rights under the lease. If you fail to include any important details about your tenancy that are beneficial to you; the new landlord may be able to deny you those benefits later.
Frequently Asked Questions
What is an estoppel certificate used for?
By definition, An estoppel certificate is a sign statement by a party (such as a tenant or mortgagee) certifying for the benefit of another that certain facts are correct, such as that a lease exists, there are no defaults, and rent is paid to a certain date.
Who prepares the estoppel?
When prepared by the buyer, however, the estoppel certificate can be tailored to the specifics of the lease and, as previously discussed, can provide an opportunity to clarify lease ambiguities identified by the buyer during its due diligence review.
Who signs an estoppel?
Tenant
An Estoppel Certificate (or Estoppel Letter) is a document that is frequently used in real estate and mortgage due diligence. It is a document used by a tenant in their landlord’s proposed transaction with a third party that is often completed, but at the very least signed.
What is tenancy by estoppel?
A lease that exists despite the fact that the person who granted it does not have the legal authority to do so (because, for instance, the landlord holds no estate in the land).
Related Articles:
