WHAT IS AN ESTOPPEL CERTIFICATE AND WHY DOES MY LANDLORD WANT ME TO SIGN ONE?

The Estoppel Certificate is a document used to provide information on the relationship between your landlord and you as a tenant. 

In most cases, this means the Landlord is selling or financing the property you are leasing and the transaction requires the landlord to obtain estoppel certificates from its tenants and present them to the third party for use in its "due diligence" review of the property.  Your lease may require you to sign an estoppel certificate, sometimes called the Tenant Estoppel Certificate (“TEC”).  The lender or buyer wants these promises because they support whatever the Landlord claims to be true regarding the lease.

Usually, the tenant is asked to certify that as of the date of the certificate, certain factors regarding the lease are true, or not. The items typically addressed include (i) whether the tenant's lease is in full force and effect and has not been assigned, modified, supplemented or amended; (ii) whether all conditions under the lease to be performed by the landlord have been satisfied; (iii) whether any required contributions by the Landlord to the tenant on account of the tenant's improvements have been received by the tenant; (iv) whether there are any existing claims, defenses or offsets which the tenant has against the enforcement of the lease by the landlord; (v) whether any rent or related payment obligation has been paid more than one month in advance; and,  (vi) whether any security has been deposited with the landlord. 

The tenant is usually required to state that its disclosures in the Estoppel Certificate may be relied upon by the specified third party or parties. This means you potentially could become liable to the third party if the certificate contains untrue statements. Moreover, certifying, for example, that the Landlord is current on any outstanding obligations to you as a tenant-such as fixing that leaky roof-if not true, will work against you should you try to get the next Landlord to fix the roof.  Accordingly, being asked by the Landlord to sign an estoppel certificate may be an opportunity for a tenant to get the Landlord to come into compliance with lease.

In any event, an estoppel certificate should not be signed without legal review.  If you are asked to sign an estoppel certificate, contact one of the Real Estate Attorneys at our Sioux City law firm, Sioux Falls law firm, or Omaha law firm for advice! For more content like this article, check out our Real Estate Lawyer blog!