An Estoppel Certificate is a legally binding document signed by a tenant to verify the terms and status of a lease. The idea here is to protect tenant rights but also help third parties, like interested buyers, potential investors, and mortgage lenders, who have a right to know the exact relationship between a tenant and their landlord before making a decision about the property in question.
An Estoppel certificate sometimes goes by an estoppel letter or agreement, a rental information questionnaire, or simply an estoppel. Either way, the goal of the document is to tell prospective stakeholders about the rights and privileges of tenants, countercheck information provided by the property owner, and verify that there are no ongoing or potential claims against the current landlords.
In our template, we cover the most essential details found in standard estoppel deeds used in the U.S:
- Names and Contact Details of Parties
- Rent amount
- Lease Duration
- Information about security deposit
- Information on lease renewal and extensions
- Any outstanding disputes or claims against the landlord
- Any verbal agreements not included in the lease document
As an editable document, our template serves as a handy tool for tenants who may have to (under the terms of their lease) complete, sign, and submit an estoppel certificate when asked for one. It is also useful for landlords who may be selling a building or refinancing a mortgage. For third parties, it can help them in their due diligence, reducing the possibility of any costly surprises later on or any disruptions to cash flow from the leased property.
Estoppels are typically and most commonly needed when dealing with properties consisting of multiple housing units, offices, or retail spaces.
What Is Estoppel?
Estoppel is a principle of common law found in the legal systems of the US, UK, Canada, and many other countries. It essentially offers a legal avenue for you to stop someone from going back on their word and unfairly causing damage to you or making a claim that goes against their past actions or words. If legal action is taken, the court might issue an order to stop an individual from doing any of that.
When Do You Need One?
Not sure when you might need our pre-made template? Consider some of these real-life situations where you might need an Estoppel letter or certificate:
Scenario A: You’re a property owner
Let’s say you own a residential complex you’ve been renting out for the past 5 years. Due to some personal reasons, you now want to sell it and move your business to a new city. You are approached by a potential buyer. After an initial round of negotiations, he is now asking for estoppel certificates signed by all your tenants before he gives you his final word on the deal. The reason? Every potential buyer has a legal right to understand the leases they are taking over before they agree to buy.
Scenario B: You’re an investor
Now, imagine you are a big-shot investor who wants to refinance an old property, but you are not sure if the owner is telling you the truth about his rental income. In this situation, you need to ask them for estoppel to confirm that tenants are paying what the landlord says they are, that lease terms are what the landlord has said they are, and that there are no pending disputes where you may be held liable in the future.
Scenario C: You’re a tenant
Now, let’s say you are a long-time tenant who signed a fixed lease 10 years ago. Naturally, during this time, there is a high chance you came to many verbal agreements with your landlord that were not part of the original contract.
From the permission to have a pet and exclusive use of a backyard or parking zone to how you pay for utilities. As it happens, your landlord is now selling the building, and you are not sure if you enjoy the privileges you once did. Here, an estoppel certificate gives you a perfect chance to inform the new landlord of your unwritten rights, privileges, and expectations (as a tenant).
To learn more about different types of estoppel certificates, such as equitable estoppel, promissory estoppel, collateral estoppel, and estoppel by deed, feel free to read up here.
Now, let’s explore each section of our template in a bit more detail:
Who Are the Parties Involved?
In the first section, you add details about the parties to the lease. We have added blank spaces for you to flesh out with the following:
- Date the certificate is issued
- Name and address of the landlord
- Name and address of the tenant
- Type of Property (Residential or commercial)
- Location of property in question
Term of Lease
Identify the nature of your agreement: is it a fixed lease or a monthly rental?
If you check the first box, you need to identify both, the date your lease starts and ends. You also need to specify if the original agreement contained any talk of a renewal. If it did, use the space provided to describe the details of such a potential renewal; for example, you may have the option to renew if you agree to readjust the rent based on fair market value.
Now, if a lease is a monthly rental, you only need to specify the date your lease starts. This is because a periodic tenancy usually does not have an expiration date and is normally signed for an indefinite period. That said, you will need to specify the notice period as per your lease. For most lease agreements in the U.S., this is usually a 30, 60, or 90-day period, but you should probably confirm this with the original lease deed.
Rent
In this section, give an overview of your rent structure.
Start by selecting the payment frequency that applies to your tenancy: in other words, how often do you pay rent? Monthly? Yearly? Or do you have some other arrangement?
Once you note down your rent collection frequency, mention the exact amount you pay at the end of each period. Also, specify if each payment is due on, say, the first or fifteenth of every month (as the case may be).
We have also added a further provision for you to mention the penalty (if any) for late payment, either as a lump sum amount or a % share of the rent. Always make sure to tally up these details with the original contract.
In the next part, confirm how you process your payments: via check, an electronic money transfer, by post, or some other way.
Don’t forget to mention how your rent is supposed to change in the future. For example, as per your lease, there may be a 10% increase in your rent every year. This is important knowledge for any potential buyers or investors, new landlords, prospective tenants, lenders, and real estate agents who have a stake in a particular piece of property.
Past and future rents
In the next two sections (IV and V), furnish details about:
- The last time you paid rent: Note the exact amount paid and what period it covered.
- Any rent you’ve already paid for: Mention if there is any prepaid rent, how much this was, and what period it was meant to cover.
Security Deposit
A security deposit is paid to a landlord as protection against any damage or losses to the property caused by a tenant. In this section, specify the exact amount of your deposit, and how long (in terms of number of days) your landlord has to refund the security after a lease ends.
Modifications
In this section, the tenant confirms that the lease has not been amended or altered in any way.
In case it has been modified, the tenant must (in the blank space provided) clearly state what these modifications are, and when they were made.
What to write about here?
Here are some common things tenants and landlords come to casual, unwritten agreements about:
- Free use of a storage area
- Keeping a pet
- The exclusive use of a backyard or other space
- Permission to sublet
- Use of a particular parking space
- Reduced rent in exchange for maintaining a part of the building
Defaults
In this part of the Certificate, a tenant verifies that there are no defaults under the lease in question; in other words, verifying they have fully complied with the terms and conditions of the lease agreement on their part. However, if defaults do exist, check the third box and use the space provided below to identify and describe what these are.
Right to Purchase
In this section, the tenant divulges if they have any legal right to buy the property they are renting from the landlord after a certain period, usually done so at the end of a lease term.
Check the first box if the original lease agreement does not give the tenant any such right to buy the leased property.
However, if the agreement does stipulate a tenant’s right to purchase, you will check the second box and use the space provided below to specify the conditions under which this right may be exercised. For example, it is typical for a lease-purchase agreement to ask a tenant to pay a non-refundable fee to secure this right. Such agreements are typically used for residential properties, allowing aspiring homeowners to test-drive a home before committing to full ownership.
Repairs and Maintenance
Now, imagine if you were to buy a new residential building as part of a real estate development project. Only to realize that all your new tenants are awaiting electrical or plumbing repairs. Not fun, right?
To avoid this, third parties are afforded a legal right to know what they are signing up for. For a new property owner who wants to avoid any unpleasant surprises, there must be perfect clarity regarding the cash flow generated from a lease and factors that might affect it.
This section has been added to find out if the landlord has done all repair and maintenance activities as per the original lease. If not, the tenant must specify which repair or maintenance issues are pending so third parties have an idea of how much money it would cost to repair and renovate, helping them make more informed financial decisions.
Subletting
Subletting is when a tenant rents out a leased property to someone else on a temporary basis. While the practice is legal in the US, you might want to check with your local laws or refer to the terms of your agreement to find out if you can or cannot sublet your home or apartment to, say, a friend or close relative.
In this section, you will:
- Specify if the property is being sublet or not
- Confirm whether or not the landlord’s consent was obtained
- If you are subletting, furnish details about the sublet (including the name of the subtenant, term, and any other relevant details)
Statement & Signature
At the end, the tenant must add their signature and mention the date when they submitted the estoppel certificate. By adding a dated signature, a tenant assures all third parties that all the information contained in the Estoppel Certificate is true and accurate to the best of their knowledge.
Notarization
The last page of our form provides a standardized acknowledgment of the estoppel by a notary public who must verify the identity of the person signing the estoppel certificate.
The notary public must also verify that the signature is authentic and not forged by personally witnessing the tenant sign the certificate and then adding their official notary seal or signature.
Not that different states differ in terms of what kind of notarization is necessary for the validity of different legal documents. So, you must make sure that you are familiar with the notarization laws and procedures in the state where the rental property in question is located.
Are Tenants Legally Obligated to Submit an Estoppel Letter?
A typical lease or rent agreement is likely to have a specific provision that requires tenants to submit an estoppel letter if a landlord so requests. Note that you need to submit, sign, notarize, deliver, or otherwise furnish the estoppel certificate within a specific period stipulated in your lease. Tenants who are not able to do so may be required to pay a penalty charge or risk being held accountable for any losses suffered by the landlord as a result of the tenant not timeously returning the estoppel certificate.
Tenants are also legally responsible for making sure the information provided is true, factual, and comprehensive. This keeps things clear for everyone and safeguards the interests of the landlord as well as third parties.
Who is our template for?
- Landlords
- Tenants
- Potential Buyers
- Financial Lenders (individuals or financial lending institutions)
- Real Estate Investors
- Property management companies
What is this template for?
- To confirm the financial and legal standing of leases before the purchase of a property
- To validate lease terms during property sales or financing
- To assess a property’s revenue and tenant commitments as part of due diligence
- To protect all parties in a real estate transaction by verifying lease terms and conditions
- To prevent misunderstandings or disputes about tenant agreements
- To ensure that a property’s financial value and obligations are accurately represented
What types of properties need an estoppel?
- Commercial real estate
- Homeowners’ associations
- Condo compounds
- Residential areas
- Multi-family real estate
- Office complexes
- Housing societies
Wrap Up
Whether you’re closing a high-end property deal or simply doing your due diligence before tying down your savings to a promising real estate venture – an Estoppel Certificate is an important document to have.
For starters, by providing accurate and verified information about the lease’s terms, estoppel helps you address potential discrepancies or uncertainties regarding ongoing lease agreements, ensuring greater clarity among all the parties involved in a property transaction, such as buyers, lenders, or investors. Even though it is not required in every real estate transaction, we certainly recommend it as it creates additional security for landlords, tenants, investors, and lenders.
From the viewpoint of landlords and especially tenants, the best part about an estoppel document is that it makes sure any agreements made verbally that were not part of the original lease can stay valid. Preventing any party from making a false claim or going back on their word.
To ascertain which tenant rights apply in your specific situation, you are advised to consult an attorney licensed to practice in the area where the leased property is located.
Download our free, print-ready, and editable Estoppel Certificate template right away in Google Docs, PDF, and Word formats!
