What is a Tenant Estoppel Certificate (also referred to as an Estoppel Agreement)?
When a landlord places a rental property up for sale, the Realtor and landlord will often request that the tenants in the building complete and sign a document called an Estoppel Certificate. Sometimes an estoppel certificate is entitled Tenant Rental Information Declaration or Rental Information Questionnaire.
An estoppel certificate is used to inform a potential buyer of commercial or residential rental property of the rights and privileges of existing tenants. The estoppel certificate requests information about rental amount, lease terms, protected tenancy status, oral agreements with the landlord, amendments to written lease agreements, promises made by the landlord, and agreements with respect to the payment of utilities, e.g. water and gas. In short, the estoppel agreement should completely describe the nature of the relationship between the landlord and tenant. The goal is to put any prospective buyers of the rental property on notice regarding the rights and privileges that the existing tenants enjoy.
What is the effect of an Estoppel Agreement?
The contents of an estoppel agreement are conclusively presumed to be true and bind both the landlord and tenant. Plaza Freeway Limited Partnership v. First Mountain Bank, 81 Cal. App. 4th 616 (2000). In fact, the contents of the estoppel agreement are deemed conclusive even if they are erroneous. Id. Tenants are bound by the contents of an estoppel certificate. Id.; CAL. EVID. CODE § 622. Landlords are also estopped from challenging the veracity of the estoppel certificate. Miner v. Tustin Avenue Investors, LLC, 116 Cal. App. 4th 264 (2004); CAL. EVID. CODE § 622. Where an ambiguity exists between the estoppel certificate and the lease or other written document, courts will read the lease and estoppel together to rectify the ambiguity. Id.
What if the Realtor does not forward the Certificate onto Potential Buyers?
Realtors have a duty to provide prospective purchasers with any estoppel certificates. CAL. CIVIL CODE § 2079.16. In addition, a buyer can recover damages against a seller or Realtor who submits an erroneous estoppel agreement. Linden Partners v. Wilshire Linden Associates, 62 Cal. App. 4th 508, 531 (1998).
Am I required to complete an Estoppel Agreement?
A tenant must sign an estoppel certificate where the written lease contains a provision requiring the tenant to do so. Many leases contain this clause, so it is very important that a tenant reviews the lease before deciding whether or not to fill out an estoppel certificate. Where a tenant fails to complete an estoppel certificate as mandated by a lease, the tenant can be evicted for breach of the lease agreement. Absent a lease provision, a tenant is not required to complete and sign an estoppel agreement. However, in many circumstances it will be in the tenant’s best interest to fill out and sign an estoppel certificate even if the lease does not require the tenant to do so.
Should I sign an Estoppel Agreement?
Even though a lease may not require an estoppel certificate, there are a few situations where a tenant should still sign an estoppel agreement. First, a tenant should sign an estoppel agreement where the tenant has oral agreements with the landlord that are not memorialized in writing. For example, if a landlord orally agreed to allow a tenant to have a pet, the tenant would be wise to list that agreement in the estoppel certificate so the new owner will be put on notice of this privilege. Other examples include agreements about payment of utilities, garage and storage areas, subletting, use of common areas, rent reductions, security deposit interest, and rent increases. Second, in rent-controlled jurisdictions, a tenant may want to sign an estoppel certificate to inform potential purchasers of restrictions on the property in the event of a no-fault eviction, such as a restriction on condominium conversion. Third, a tenant should sign an estoppel certificate if the tenant lives in a rent-controlled jurisdiction and has protection against certain types of evictions because of age, disability or terminal illness. It is wise to talk to a tenant rights attorney or an appropriate city agency to determine whether protected status applies or whether property restrictions may apply after certain no-fault evictions.
What are the risks in signing an Estoppel Certificate?
Typically, an accurately filled out estoppel certificate will present no risks to the tenant. However, if the estoppel certificate is not accurate and describes rights that are inconsistent with the terms of the lease, a problem may result. Although rare, tenants have been sued for inaccurate estoppels, primarily in rent-controlled jurisdictions. Because an estoppel certificate is a binding document, it should not include provisions that are inconsistent with the lease or that are inaccurate. Plaza Freeway Limited Partnership, 81 Cal. App. 4th 616; CAL. EVID. CODE § 622. In order to avoid these potential issues, a tenant should be very careful to ensure that every provision listed in the estoppel agreement is accurate and complete.