What is an Estoppel certificate?
The purpose of this certificate is for a third party (a lender or a prospective investor) to verify with the tenant(s) that certain facts that could influence the settlement of the loan are correct. An Estoppel certificate is usually drawn up when taking out a mortgage or as part of the due diligence phase of an acquisition.
What is in an estoppel certificate?
Estoppel certificates may contain information regarding various aspects, but some of the most common ones include:
– Information about the leases duration and expiration date.
– That the lease contract is in full force and effect and it has not been modified, supplemented or assigned.
– The date of the last rent/lease payment.
– Whether the landlord has fulfilled his obligations as stated under the lease contract.
– Any security deposits the landlord may hold.
– The rate of the current rent/lease.
– Specifications about whether the landlord or the tenant are subject to default proceedings at the time.
It is very important for the tenant when they receive a first draft of the certificate that they signal any errors or omissions regarding their lease. If, further down the road, the property is subject to any litigations, the tenant can be held responsible for confirming incorrect or incomplete information. By signing off on the certificate, the tenant reaffirms the landlord’s compliance with the original lease, so if the tenant subsequently discovers any issues, the landlord can use the estoppel to avoid having to correct said issues.
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