Tenant Estoppel Certificates: The Hidden Trap

A “tenant estoppel certificate” sounds like something boring. But it can be critical in preserving your tenant’s rights.

Disguised by other names

Sometimes a tenant estoppel certificate comes disguised as a “Rental Questionnaire” or a “Statement of Tenancy.” No matter what it’s called, it’s wise to be very careful when you receive this sort of document.

What is it?

The term “estoppel” means to prevent someone from making a claim that contradicts what one has said or done before, or what has been legally established.

An “estoppel certificate” certifies for another’s benefit that certain facts are correct. Facts like the lease term and and the monthly lease amount.

If your landlord is selling your apartment building, you may get a request to sign a tenant estoppel certificate. This is to assure the prospective buyer the financial details of the income property, aka your home.

But note that the estoppel certificate is for another’s benefit. It’s not for you.

Whether you need to fill out a tenant estoppel certificate may depend on your lease. Some older leases may not include the requirement to fill out a certificate.

Serious enough it’s in the rules

The San Francisco Rent Ordinance includes wording about estoppel certificates.

Under the heading “Disclosure of Rights to Tenants Before and After Sale of Rental Units Subject to Section 37.9.,” Section 37.9(k)(1)(E) states when a building is being sold, tenants should receive:

A statement that tenants are not required to complete or sign any estoppel certificates or estoppel agreements, except as required by law or by that tenant’s rental agreement.  The statement shall further inform tenants that tenant rights may be affected by an estoppel certificate or agreement and that the tenants should seek legal advice before completing or signing an estoppel certificate or agreement.

Note that the regulation recommends that if you receive a tenant estoppel certificate, you should seek legal advice.

So what if you have sign one?

If your lease does require you to fill out an estoppel, the wording might look something like this:

Tenant shall execute and return a tenant estoppel certificate delivered to Tenant by Landlord or Landlord’s agent within three days after its receipt. Failure to comply with this requirement shall be deemed Tenant’s acknowledgment that the tenant estoppel certificate is true and correct, and may be relied upon by a lender or purchaser.

See the catch here? If this sort of clause is in your lease, and you don’t respond within three days, then whatever the landlord puts in the certificate is deemed correct. While it might look on the surface okay, there could be some hidden pitfalls that may later hurt you as a tenant.

Again, that’s why this can be a critical document.

An important case

The California Court of Appeal back in 2000 delivered an important opinion regarding tenant estoppel certificates. The case, Plaza Freeway Limited Partnership v. First Mountain Bank, involved commercial tenants, but the Court’s opinion is viewed as applying to residential tenants too.

First Mountain Bank had a 25-year-lease. When its leased building was sold, someone signed an estoppel certificate that stated the date the lease ended. First Mountain Bank had an option to extend the lease, but they had to notify the landlord by a certain date before the lease expired.

The estoppel certificate had the lease termination date wrong, and the landlord claimed that First Mountain Bank was past the deadline notification time to extend the lease.

The Court of Appeal decided that First Mountain Bank “was bound by the representations contained” in the estoppel certificate. Therefore, because they didn’t notify the landlord by the termination date stated on the estoppel certificate, they were not entitled to an extension as dictated by their lease.

No errors

The lesson by the Court? The tenant estoppel certificate has got to be accurate to protect your tenant’s rights. Therefore, you should be very careful that there are no errors. This could go against you in the future.

What if your lease doesn’t require you to fill a certificate out?

Perhaps you are given a tenant estoppel certificate. You have checked your lease, and it doesn’t require you to fill it out. Should you?

This depends on a number of factors that could be unique to your specific circumstances, which is why I would advise you to speak to an experienced tenant attorney.

One important exception about filling it out

In San Francisco, a landlord contemplating an owner move-in might request information from you as to whether you are in one of the protected classes.

According to the San Francisco Rent Ordinance, landlords are prohibited from doing an owner move-in if you qualify for one of the protected categories like being disabled or 60 years of age and living in the apartment for 10 years or more.

You may choose not to answer any of the questions as to whether you will qualify as being in one of the protected classes in the future. This might make you subject to an eviction now.

If your lease requires it

It’s likely the tenant estoppel certificate will be a form letter. The spaces will limit your answers and you’ll have no additional space to expand.

Remember, though, if there are any significant details of your tenancy favorable to you that are not on the tenant estoppel certificate, then the new landlord who buys the building could deny this benefit to you later.

You should consider writing a letter that describes the details of your lease that are favorable to you. Or fill out the certificate and reference an addendum and then, of course, include the addendum.

What should you include? Here’s some things to consider:

• Amenities

• Security deposit

• Prohibited by the lease, but allowed now by the landlord

In my next blog, I will write more in detail about what you should consider.

Clock’s ticking

It might take you some time to articulate, but if you are given only three days to respond to a request to fill out a tenant estoppel certificate, you should start thinking about it as soon as you get the document.

Once you receive an tenant estoppel certificate, the clock is ticking.

Again, first check your lease as to whether you are required to fill one out.  If you are required to do so, then I tell my clients to go over their lease on a line by line basis.  This takes time, but your list should be complete.

Did you receive a tenant estoppel certificate? It’s an important document that, if filled out properly, will help you protect your tenant’s rights. If you have any questions you might consider seeking the advice of an experienced tenant attorney.

Know your rights. Protect yourself.