By definition, an estoppel certificate is a “signed statement by a party certifying for another’s benefit that certain facts are correct, as that a lease exists, that there are no defaults, and that rent is paid to a certain date. A party’s delivery of this statement estops that party from later claiming a different state of facts.’’ Black’s Law Dictionary, 572 (7th Ed., 1999).
Most commercial real estate leases require a tenant to provide an estoppel letter or certificate upon request. This certificate is often a critical step during the due diligence phase of landlord's financing. The estoppel certificate is a certified statement which verifies the terms and conditions of the lease agreement. The tenant is “estopped” or prevented from contradicting the statements previously certified. It allows buyers and lenders to rely on these statements made by the tenant as to the status of the lease agreement when making decisions to purchase landlord’s interest or lend landlord money.
The estoppel certificate is crucial to landlord’s ability operate as a business. Leases are often strict when it comes to the estoppel Most leases include a provision which requires the tenant to complete and sign estoppel certificates upon the landlord's request. Most estoppel provision provide for a tenant to return within a period ranging from only be a couple days to ten (10) business days. A failure to timely return the estoppel certificate is likely a default under the lease agreement. Some leases will additionally grant the landlord a power of attorney to complete the estoppel on tenants behalf.
The estoppel certificate asks the tenants to certify that as of the date of the document certain things are true, or to specify in some detail why they are not true, such as:
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What is a Tenant Estoppel Certificate?
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