Your landlord knocks on your door and lets you know that you need to sign an estoppel certificate. You've never heard about this type of document, but you have a very small window to sign it. You'll often see it if you're leasing a commercial property or if your landlord plans to sell or refinance their residential property.
It's important to know what they stand for and how it could affect you as a tenant. Keep reading to learn more.
An estoppel certificate or letter is a document your landlord may give you if they're preparing to sell or refinance their residential or commercial property. This includes multi-family properties and commercial real estate. The estoppel certificate compiles the details from the existing lease and verifies the current terms.
Your landlord provides the bank or prospective buyer with these certificates for transparency purposes on the property's leases. The certificate breaks down rent amount, tenant provisions and responsibilities and other details and looks at any outstanding debts.
Check your lease agreement to find out if you're legally required to sign the estoppel certificate. This will help you avoid fees or potentially defaulting on your lease if you do not respond. You should also verify the certificate's information to make sure the contract is honoring your tenant's rights and past lease agreements.
At first glance, an estoppel certificate will resemble your lease. However, it should never take the place of a lease. The certificate will help verify your lease's conditions and your responsibilities as the tenant to their new buyer.
It's essential to pay attention to details and make sure every verbal agreement is included to protect yourself as a tenant. If you leave out any vital information, the new buyer could deny you those later. Here's what they can include:
The undersigned, _____________ ("Tenant"), hereby certifies to _________________, as follows:
No other security deposits have been made except as follows:
8. Tenant is paying the full lease rental which has been paid in full as of the date hereof. No rent or other charges under the Lease have been paid for more than thirty (30) days in advance of its due date except as follows:
9. All work is required to be performed by Landlord under the Lease has been completed except as follows:
10. To the best of Tenant's knowledge, there are no defaults on the part of the Landlord or Tenant under the Lease except as follows:
11. To the best of Tenant's knowledge, Tenant has no defense as to its obligations under the Lease and claims no set-off or counterclaim against the other party except as follows:
12. Tenant has no right to any concession (rental or otherwise) or similar compensation in connection with renting the space it occupies other than as provided in the Lease except as follows:
All provisions of the Lease and the amendments thereto (if any) referred to above are hereby ratified. The foregoing certification is made with the knowledge that a lender is about to fund a loan to Landlord or a third party purchaser is about to purchase the
Premises from Landlord and that such parties shall rely upon the representations herein made by Tenant.
IN WITNESS WHEREOF, this certificate has been duly executed and delivered by the authorized officers of the undersigned as of ___________.
Most estoppel certificates don't carry a burden for the tenant. As long as the landlord followed the signed lease agreement and included all verbal agreements, it would be best if you were protected. The new buyer must uphold the terms of your lease through this certificate if you sign.
First, ask your landlord how long you have to review this estoppel certificate. It should be about 15 days. Pull out the lease and compare all details to confirm the terms. If possible, ask an attorney or broker to review and make sure your rights were not compromised. If you have any questions, flag them and set up a call with your landlord to review.
Some leases may require you to sign the estoppel certificate if sent by your landlord. If you don't answer, it could mean you're in default of your lease.
Other lease agreements may not mention it or have fees attached if you don't reply. It's still in your best interest to review it as it gets your relationship with the new buyer off on the right foot.
If not returned by deadline or you don't reply, everything within the estoppel certificate will be considered accurate. For instance, your landlord will not honor revisions, and you may face an expensive fee for missing the deadline. It's vital to review it and return it on time.
Your landlord can also sue you if you don't respond.
While an estoppel certificate can help resolve disputes, it can also leave you in a vulnerable position as a tenant. In the end, it's equally beneficial for the landlord as it makes it easier for them to sell but also for you a tenant to keep the relationship with the new buyer.
Ensure that you review every detail on this certified legal document upon receipt and verify all details as they relate to your current lease. If you have any revisions, make sure you respond within the assigned period of time so they are included. Otherwise, your landlord can fill it out without your input.