What Is a Tenant Estoppel Certificate?
A tenant Estoppel Certificate is a document signed by a tenant that summarizes the present status of the lease, and is intended to assist third party purchasers or lenders in their due diligence regarding the property.
Why do Landlords Request Tenant Estoppel Certificates?
Typically, when the owner of a commercial or multi-unit property sells or refinances the property, an Estoppel Certificate is usually requested by the purchaser and/or lender. It helps remove liability to the new owner in certain matters with the existing tenants of the property. It also aids potential buyers in understanding the leases they are taking over.
An Estoppel Certificate can also be used if the current owner of a property wants to refinance, or purchase a property and use his current property as collateral. The bank or financing company will ask for an estoppel certificate for each tenant. The document can be used to confirm that the property is likely to have good cash flow, so it can help the lender in the decision-making process to approve the refinance requested by the owner or buyer.
Three types of properties typically require estoppel certificates. They are multifamily real estate, some residential real estate, and commercial real estate. Commercial leases in particular typically have a lot on the line, and uncertainty about a tenant’s understanding of commercial leases could lead to unpleasant surprises for a prospective buyer or lender.
What Does an Estoppel Certificate Contain?
The Estoppel Certificate requests information such as:
• The beginning and end date of the lease
• The tenant’s name and contact details
• The property address
• The monthly rent amount
• Any unpaid rent owed to the landlord
• Work not completed by the landlord that is required by the lease
• A certification that lease has not been amended or altered in any way not reflected in the estoppel certificate
• Information about the security deposit
• The last date to which rent has been paid to the landlord
• Verification that no defaults exist, or a statement of defaults made by the landlord or tenant
Is a Tenant Obligated to Complete an Estoppel Certificate?
Tenants are required to complete an Estoppel Certificate if the lease includes such an obligation in its provisions. A tenant is not obligated to complete and return an Estoppel Certificate if there is no such requirement in the lease.
Should you require more information or need to discuss your circumstances, please contact us at [email protected] or 888-441-2355. Our experienced professionals are standing by to answer any inquiries you may have.