Tenant Estoppel Certificates

What is a Tenant Estoppel Certificate?  To answer that question we must first explore the legal and equitable notion of “estoppel”.  Simply put, estoppel is a time-honored principle of the law that a person cannot take a position which is inconsistent with a prior action or declaration.  For example, a landowner who grants permission to an adjoining landowner to cross his property or use a portion of his driveway for road access would be estopped from claiming that his neighbor is trespassing on his land.  The doctrine of estoppel forces a party to live with and be bound by his or her prior acts or declarations.  Think of estoppel as the legal equivalent of calling someone out for hypocrisy.  (You can’t say one thing and do the opposite!)

A Tenant Estoppel Certificate is a written declaration by a tenant concerning the status of his or her lease.  When selling a property which is tenant occupied (think of an office building or a shopping center) the buyer will insist on receiving a Tenant Estoppel Certificate from each tenant, stating the amount of the monthly rent, that all rents are paid to date, the amount of the security deposit, that the lease is in good standing and that the tenant has no claims against the landlord (such as claims for repairs or other problems with the premises).  It is a declaration by the tenant that the lease is in full force and that the tenant is current and without complaint about his or her tenancy.  Thus, the tenant would be “estopped” from asserting claims against the new owner for matters arising prior to the transfer of the property. 

Tenant Estoppel Certificates are also typically requested by lenders when they make mortgage loans on a property.  This is because the tenant leases are pledged to the lender as security for the loan.  (On default the lender has the right to step in and collect the rents to pay the mortgage.)  Lenders require the tenant to sign an estoppel certificate in the same way that a buyer of the property would require.  Both buyers and lenders want to be sure that all of the tenants are happy and are paying rent under their leases as agreed.

Tenants must be careful when they are asked to sign an estoppel certificate to make certain that they have no issues with the landlord.  A tenant should never sign an estoppel certificate if there are unresolved issues such as unperformed repairs, rent disputes or other problems with the tenancy.

The next time you are presented with a Tenant Estoppel Certificate you will be “estopped” from claiming we didn’t warn you!

– Kevin Palmer


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