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 request a tenant to complete and sign an estoppel certificate. An estoppel certificate is used to inform a potential buyer of commercial or residential rental property of the rights of existing tenants. The 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 payment of utilities, e.g. water and gas. In short, the estoppel agreement lays out the nature of the relationship between the landlord and tenant. The goal is to inform any prospective buyers of rental property about the rights of existing tenants.
What is the Effect of an Estoppel Certificate?
The contents of an estoppel agreement are conclusively presumed to be true and bind both 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 erroneous. Id. Tenants are bound by the contents of an estoppel certificate. Id. and Evid. Code § 622. Landlords are also estopped from challenging the veracity of the certificate. Miner v. Tustin Avenue Investors, LLC, 116 Cal. App. 4th 264 (2004) and 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. Civil Code § 2079.16. In addition, a buyer can recover damages against a seller and realtor who submit an erroneous estoppel certificate. Linden Partners v. Wilshire Linden Associates, 62 Cal. App. 4th 508, 531 (1998).
Am I Required to Complete an Estoppel Certificate?
A tenant must sign an estoppel agreement where the written lease contains a provision requiring the tenant to do so. Where a tenant fails to complete an estoppel certificate as mandated by a lease, the tenant can be evicted for breach of lease. Absent a lease provision, a tenant is not required to complete and sign an estoppel agreement.
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 sign an estoppel. 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 this in the estoppel. Other examples include agreements about payment of utilities, garage and storage, 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 to inform potential purchasers of likely restrictions on a property in the event of a no-fault eviction. And third, a tenant should sign an estoppel certificate if the tenant lives in a rent-controlled jurisdiction and has protection against eviction because of age, disability or terminal illness. A tenant may also want to use the estoppel agreement to inform potential buyers of likely restrictions on a property. If this applies, it is wise to talk to a tenant rights attorney or an appropriate city agency.