What Is an Estoppel Certificate in Real Estate?

Has your landlord given you an estoppel certificate to sign? If you’re unfamiliar with what this certificate means, your role as a tenant can be confusing. As such, it’s important to know what it is, what it means, and when you might need to sign one. In today’s article, we’ll go over everything you need to know. 

Main Takeaways

• An estoppel certificate is used to confirm important details about an existing lease, such as the rent amount, security deposit, lease dates, and any outstanding obligations.
• Buyers and lenders may request estoppel certificates when a rental property is being sold or refinanced so they can verify information about existing leases.
• A tenant’s obligation to complete an estoppel certificate may depend on the lease terms and applicable laws, so tenants should carefully review the document before signing it.

What Is an Estoppel Certificate in Real Estate?

An estoppel certificate is a legal document used in real estate transactions. Usually, when a landlord or owner of a multi-unit property sells or refinances the property, an estoppel certificate is requested. Then, the landlord provides their tenant(s) with an estoppel certificate to sign to indicate the present status of their lease. 

A certificate gives a third party more information about a property. For instance, a potential buyer or lender may request one to confirm the monthly rent and security deposit amount. After all, buyers will want to understand the leases they are potentially taking over. 

Additionally, lenders might need this information for their records as well. For instance, if an owner is refinancing a property, a lender may need to confirm that the tenants are paying the landlord the amount the landlord claims to receive and that there are no pending tenant disputes. 

It’s important for property owners, tenants, and rental property management companies in Washington, DC, to understand these certificates, when they may need to be signed, and each party’s obligations. 

What Does an Estoppel Certificate Include?

When a landlord requests an estoppel certificate, you’ll see that you must provide a ton of information about the property. For instance, most letters request information such as:

• Lease agreement start and end dates
• Tenant’s personal information, including their name and contact details
• Details about the property
• Monthly rent amount
• Outstanding rent owed to the landlord
• Prepaid rent, if any
• Unfulfilled landlord obligations required by the lease
• Confirmation of the lease’s original terms or summary of any modifications
• Security deposit information
• Last date rent was paid to the landlord
• Verification of absence of defaults or disclosure of any existing defaults by either party

Properties That May Use an Estoppel Certificate

Estoppel certificates are commonly used with multi-family and commercial properties and may also be used with some residential properties. Let’s review why estoppel certificates may be required for each of these property types. 

1. Multi-Family Real Estate
2. Commercial Real Estate
3. Residential Real Estate

Multi-Family Real Estate

Since multi-family properties have multiple tenants, several lease agreements are involved. As such, it’s important for potential property buyers to fully understand the details of each lease agreement or any disagreements between the current property owner and tenants. For instance, if current tenants are waiting for repairs or maintenance promises from the current landlord, the new owner will need to know about it. Otherwise, they may unintentionally take on more costs than they bargained for. 

Commercial Real Estate

Commercial leases can also have a lot on the line for new potential owners. For one, they can involve substantial rent obligations for tenants. Additionally, commercial rental property leases may have more rent adjustments or changes than other types of real estate. 

Furthermore, there are also more variables regarding who is responsible for certain expenses and how common area maintenance is handled. As such, potential buyers must get as much information about the property they’re potentially taking over before getting wrapped up in it. 

Residential Real Estate

Compared to multi-family and commercial real estate, tenant estoppel letters are less common in residential properties. After all, there may be fewer leases for a potential buyer to review. However, that doesn’t mean there aren’t any benefits to an estoppel certificate for potential buyers.

For instance, some tenants and landlords have verbal or undocumented agreements that aren’t included in a lease agreement. These arrangements may be important to disclose so that prospective buyers have an accurate understanding of the existing tenancy. If potential buyers are unaware of these verbal or undocumented agreements, it can lead to confusion or unpreparedness. 

Are Tenants Obligated to Complete Estoppel Certificates?

If a landlord plans to sell their property, they may need their tenants to fill out an estoppel certificate. Landlords who want tenants to complete estoppel certificates upon request may consider including an appropriate provision in the lease, subject to applicable state and local laws.

That said, if your landlord presents you with an estoppel letter and your lease requires you to sign it, it’s crucial that you complete it within the specified timeframe. 

Depending on the terms of the lease, if you don’t complete and return the certificate by the required deadline, the landlord may have certain remedies available. Depending on the lease terms and applicable law, failing to complete an estoppel certificate may trigger certain consequences specified in the lease. For example, some lease provisions may state that a failure to respond allows certain information about the tenancy to be treated as confirmed. However, this can be problematic if the information is incorrect. Depending on the lease terms and applicable law, failing to sign and return the document may also result in other consequences, including potential damages or remedies available under the lease.

However, if your lease does not require you to complete an estoppel certificate, you may not be contractually obligated to sign one. Requirements can vary depending on the circumstances and applicable law. Regardless of whether the lease requires a response, tenants should carefully review the certificate before signing it and consider seeking legal guidance if they are unsure about its contents or their obligations. After all, once you sign the document, you agree that the information is accurate when it may not be. 

Frequently Asked Questions About Estoppel Certificates

Estoppel certificates can come up during the sale or refinancing of a rental property, and tenants may not always know what they’re being asked to sign. Here are answers to a few common questions.

What is the purpose of an estoppel certificate?

An estoppel certificate helps confirm important facts about an existing lease for a third party, such as a prospective buyer or lender. It may confirm details like the rent amount, security deposit, lease dates, and whether either party has outstanding obligations.

Who fills out an estoppel certificate?

A landlord may provide the certificate to a tenant and ask the tenant to review, complete, and sign it. The exact process can depend on the property, transaction, lease terms, and applicable law.

Do tenants have to sign an estoppel certificate?

It depends. A lease may contain a provision requiring the tenant to complete an estoppel certificate when requested. Other legal requirements may also apply depending on the jurisdiction, so tenants should review their lease and the document carefully.

What should a tenant check before signing an estoppel certificate?

Tenants should make sure the information accurately reflects their lease and any other agreements with the landlord. This may include the rent amount, security deposit, lease dates, payments, modifications, and any unresolved obligations or disputes.

Can an estoppel certificate include agreements that aren’t in the lease?

It may ask about modifications, additional agreements, or other arrangements between the landlord and tenant. This is one reason tenants should carefully review the information and make sure it accurately reflects their situation before signing.

Why would a buyer request an estoppel certificate?

A prospective buyer may use the certificate to verify information about existing leases before purchasing a rental property. This can help the buyer understand the agreements and obligations they may be taking over.

Know Your Role as a Landlord

If you’re a landlord looking to sell or refinance your property, you or your resident manager may need to present your current tenants with an estoppel certificate. Essentially, it helps give prospective buyers or lenders as much information as possible before proceeding with a large real estate transaction. That said, landlords may want to discuss including an estoppel provision in their lease agreements with a qualified legal professional.

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