The Paperwork That May Protect You if Your Landlord Sells Your Building

published Jul 10, 2024
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If you’re a renter of a multifamily property that has recently been sold, you may have been handed an estoppel certificate by your landlord for the first time and asked to sign it. If you’ve never heard of the document, you might be confused — what does this certificate do? Will it protect you from any changes your building’s new owner might want to enact?

Or, maybe you’re a landlord selling a building full of renters and you need to send one out to your tenants. Here’s everything you need to know about an estoppel certificate — including what it is, why it matters, and when you need to use one.

What is an estoppel certificate?

An estoppel certificate is a document frequently used in real estate transactions — generally, when a landlord sells a multifamily property. This certificate is a one-sheet contract that landlords ask tenants to sign prior to the sale of the property to a new building owner and landlord. 

The document confirms the current terms of the lease, including details like the rent amount, lease expiration date, and any other agreements between the tenant and the existing landlord. 

This document also provides potential buyers a clear understanding of the existing lease agreements and helps avoid potential disputes after selling the property.

Why is an estoppel certificate necessary for a landlord?

An estoppel certificate from existing tenants is an important step in a landlord’s property sale process. 

“Obtaining a signed estoppel from tenants before selling a property avoids issues down the line,” explains Claudia Cobreiro, founding partner of Cobreiro Law in Coral Gables, Florida. “Not only between the seller (current landlord) and buyer (new landlord), but also between the seller and tenant moving forward. They eliminate any disputes between the parties after the sale.”

Here are a few reasons why an estoppel certificate is necessary:

  • Verification of lease terms: The estoppel certificate verifies the lease terms directly from the tenant. This ensures that the information presented to potential buyers is accurate and reliable.
  • Transparency for buyers: Prospective buyers need to know the exact terms of existing leases before purchasing a property. The estoppel certificate gives them a clear picture of the rental income, lease duration, and any special agreements or concessions made by the landlord.
  • Protection against future disputes: By having tenants confirm the lease details in writing, landlords (and tenants) protect themselves from future disputes. If a tenant later claims that the lease terms were different, the estoppel certificate can serve as evidence to resolve the disagreement.
  • Facilitation of financing: Lenders often require estoppel certificates as part of the due diligence process before approving a mortgage for a property purchase. The certificate reassures the lender that the rental income is stable and predictable.

What to do if you receive an estoppel certificate as a tenant

If you’re a tenant and you’ve been presented with an estoppel certificate, it’s important to follow these steps:

  • Read it carefully: Don’t rush through the document. Read every section carefully to understand what you are confirming. You have the right to review the estoppel certificate carefully before signing it. Ensure that all the information it contains is accurate and reflects the terms of your lease. If you find any discrepancies, notify your landlord immediately and request corrections.
  • Seek clarification: If you are uncertain about any aspect of the estoppel certificate, you have the right to seek legal advice. Consulting with a lawyer specializing in tenant laws can help you understand your rights and obligations and ensure you are not signing a document that could negatively impact you.
  • Document communications: Keep records of all communications regarding the estoppel certificate, including emails and written notes from conversations.
  • Consult a lawyer: If you have any doubts or concerns, consulting a lawyer can provide the legal advice to make an informed decision.
  • Refusal to sign: If your lease does not obligate you to sign an estoppel certificate and you have concerns about the document, you can refuse to sign it. However, refusal might create friction with your landlord and could potentially impact your tenancy, especially if the landlord deems it necessary for the sale of the property.

Do you have to sign an estoppel certificate?

As a tenant, you might wonder if you are legally required to sign an estoppel certificate. The answer largely depends on the terms of your lease agreement. 

“Depending on the language and the tenant’s lease agreement, the tenant may be obligated to sign an estoppel certificate when presented with one for this purpose,” says Cobreiro. “However, a tenant is never obligated to sign an inaccurate estoppel certificate. Should a tenant be presented with an erroneous certificate, the tenant should rectify or confirm the certificate’s contents before signing.”

You are not legally required to sign an estoppel if your lease does not explicitly mention the requirement. Be sure to review your lease agreement carefully, and if you have questions, seek legal advice to understand your obligations as a tenant.