An estoppel certificate is a common and important document in commercial real estate risk mitigation. It independently confirms key lease terms directly with the tenant and documents important information that may not otherwise be apparent from the seller’s records. 

Buyers and lenders use estoppel certificates as part of their due diligence to determine whether a property’s leases and income stream match the seller’s representations before closing. An inaccurate estoppel certificate can create disputes, delay a transaction, or affect the parties’ rights and obligations.

What Is an Estoppel Certificate?

An estoppel certificate is a document that states key information about a lease, including the current status and terms of the lease, rent, default status, renewal rights, security deposit, landlord defaults, and other important agreements.

The format may vary, but the objective is generally the same: to reduce uncertainty about lease terms, tenant defaults, prepaid rent, security deposits, and other matters that can affect property value or lender risk.

Estoppel certificates are commonly required in commercial real estate transactions, including property sales and financing. They may also be used in: 

  • Lease assignments
  • Refinancings
  • Commercial mortgage-backed securities transactions
  • Loan assumptions
  • Sale-leaseback transactions
  • Ground lease transactions
  • Portfolio acquisitions and financing
  • 1031 exchanges
  • Joint ventures
  • Equity recapitalizations
  • Real estate investment trust acquisitions
  • Asset management

The term estoppel evolved from estopper, the idea of stopping a party from changing a position it had previously taken. The modern-day estoppel certificate grew out of the broader legal principle of estoppel in English common law, which can prevent a party from denying or contradicting a representation when another party has relied on it.

Written estoppel certificates became increasingly common as buyers and lenders sought documented verification of lease terms and tenant obligations before closing.

How Does an Estoppel Certificate Work?

Typically, a party to the transaction or its professional representatives will request that the relevant third party, commonly a tenant, sign the estoppel certificate to confirm the information stated in it.

When requesting an estoppel certificate, the requester should: 

  • Provide a complete, clearly worded form
  • Include the executed lease and relevant amendments
  • Allow reasonable time for review and response

An executed estoppel certificate can have significant legal consequences. Depending on the language of the certificate, the lease, and applicable law, a party may be prevented from later contradicting representations made in the certificate.

What to Include in an Estoppel Certificate

The typical information in a tenant estoppel certificate includes:

  • Confirmation that the lease exists
  • Current lease term, including the remaining term and any extension options
  • Current rent amount
  • Rent due date
  • Any prepaid rent
  • Statement of any landlord or tenant defaults, or confirmation that no known defaults exist
  • Security deposit amount and status, including any interest payable, if applicable
  • List of any amendments, concessions, or agreements outside the written lease
  • Any rights of first refusal, options to expand, or other special rights affecting the use of the space
  • Any disputes, setoffs, or claims that could affect rent or occupancy
  • Qualification that statements are made without independent investigation, where appropriate

Estoppel Certificate Example

When Are Estoppel Certificates Required?

Estoppel certificates are routinely required as a closing condition or lender requirement in commercial real estate transactions. The specific circumstances in which a tenant must provide one are usually governed by the lease.

Lease Assignments

A lease may require the tenant to provide an estoppel certificate when an assignment is being considered. For example:

As a condition to any assignment of this Lease by Landlord, Tenant agrees that, upon written request from Landlord, Tenant shall execute, acknowledge, and deliver an estoppel certificate within ten (10) days after receipt of such request.

The exact requirements will depend on the language of the lease.

Financing

A lender may require an estoppel certificate before approving financing involving the property or lease as collateral. For example:

As a condition precedent to any lender approval incorporating this Lease as collateral, Tenant agrees that, upon written request from Landlord, Tenant shall execute, acknowledge, and deliver an estoppel certificate within ten (10) days after receipt of such request.

Property Sales

A buyer may request an estoppel certificate before closing on a commercial property sale to confirm the status of the leases and the property’s income-producing potential. For example:

As a condition to any sale of the property which incorporates this Lease, Tenant agrees that, upon written request from Landlord, Tenant shall execute, acknowledge, and deliver an estoppel certificate within ten (10) days after receipt of such request.

Estoppel Certificate Process

The process laid out below will cover the estoppel request, initial request and review, resolution of disagreements, delivery of the completed certificate, and legal enforcement (if needed).

1. Make a Contractually Sound Estoppel Request

If the lease requires the tenant to provide an estoppel certificate, the landlord or another authorized party can make a written request in accordance with the lease.

A request may state:

Pursuant to Section ____ of your Lease, you are required to execute and return an Estoppel Certificate upon Landlord’s written request.

The Property is currently involved in a pending sale, financing, refinancing, or other transaction, and the prospective purchaser, lender, or other transaction participant requires confirmation of the current status of your Lease. The requested Estoppel Certificate will be relied upon by third parties in evaluating the transaction.

Accordingly, enclosed is an Estoppel Certificate for your review and execution.

2. Have the Tenant Review the Estoppel

Allow time for tenants to read the document carefully and confirm the stated facts against their lease, amendments, payment records, and other relevant documents. If the tenant believes the certificate does not accurately reflect its rights or obligations, they need to raise the issue before signing.

3. Document Disagreements

If a tenant reports facts that the landlord disputes, the landlord should respond in writing and document the disagreement for the benefit of the buyer, lender, and other transaction participants. Limit the certificate to accurate, supportable statements and add appropriate qualifications where necessary. 

If the parties disagree about a material lease provision, they should determine whether the estoppel can be revised, qualified, or accompanied by additional documentation explaining the issue. For more complicated disputes, parties may want to consult counsel before signing.

4. Compare the Estoppel With the Lease and Other Records

Buyers, brokers, lenders, and underwriters should use an estoppel certificate as one part of their overall investigation. Cross-check the information in the estoppel against the underlying lease documents and amendments to confirm consistency on important points such as rent, expiration dates, renewal and termination options, tenant rights, and landlord obligations.

They may also compare the estoppel against:

  • Existing rent rolls
  • Payment histories
  • Tenant correspondence
  • Property cash flow
  • Operating income

Any discrepancy between the estoppel and the lease file should be investigated and clarified before the transaction proceeds.

Commercial property owners should also consider how lease administration connects with ongoing CAM expenses and other operating costs.

5. Be Aware of Enforcement and Recourse

Where the lease expressly requires the tenant to execute an estoppel certificate, failure to do so may constitute a breach of the lease. Many commercial leases require the tenant to return an executed estoppel certificate within a specified period, such as 10 to 15 days after written request.

Whether a failure to provide an estoppel constitutes an event of default, and what remedies are available to the landlord, will depend on the lease and applicable law, including any notice and cure requirements.

Benefits, Burdens, and Risks for Each Party

Estoppel certificates can benefit every party by reducing uncertainty, but they can also create risks. Tenants must be careful about what they certify, while landlords, buyers, and lenders must understand that an estoppel is only one part of their overall due diligence.

Modern office building at dusk.

For Landlords and Sellers

Buyers and lenders may rely on estoppel certificates to confirm the status of leases, aid in due diligence and closing, and may reduce the risk of disputes or renegotiation.

Benefits

  • Confirms lease terms for buyers and lenders
  • Helps uncover or resolve discrepancies
  • Reinforces the accuracy of the rent roll and property income
  • Reduces the risk of price renegotiation
  • Supports lender confidence and financing approvals
  • Enhances credibility with buyers, brokers, and lenders

Burdens and Risks

  • Potential liability for inaccurate information
  • Increased legal costs from tenant negotiations and revisions
  • Delays caused by tenant refusal, negotiation, or non-response
  • Potential price reductions, credits, or indemnity demands
  • An incomplete or unreliable estoppel package can contribute to buyer or lender concerns about the transaction

For Tenants

Legal obligation to respond may be contained in the lease, but don’t sign an estoppel certificate that is inaccurate or overly broad. Make sure to dispute and fix any issues. 

Benefits

  • Clarifies lease terms
  • Provides transparency during landlord transitions or lender takeovers
  • Helps prevent later disputes about lease terms
  • Allows the tenant to identify inaccuracies before the transaction closes

Burdens and Risks

  • Risk of limiting later claims, certain rights or defenses if the estoppel is inaccurate or incomplete
  • Potential transaction pressure when a buyer or lender needs the certificate quickly

Tenants should also pay attention to insurance obligations under their leases, including applicable commercial tenant insurance requirements.

For Stakeholders: Buyers and Lenders

Buyers and lenders also use estoppel certificates as part of their due diligence. They may rely on tenant representations when evaluating pricing, underwriting, financing, and the property’s income-producing potential.

Benefits

  • Reduces risk when financing or acquiring income-producing properties
  • Confirms lease terms and tenant obligations
  • Supports due diligence in underwriting and valuation
  • Provides additional information about the property’s leases before closing
  • Can provide remedies or other protections when a party reasonably relies on certified information, depending on the circumstances and applicable law

Burdens and Risks

  • Reliance on potentially outdated or inaccurate information
  • Challenges in verifying that tenant responses are accurate and comprehensive
  • Exposure if discrepancies are not identified during due diligence
  • Dependence on the seller or landlord to obtain required estoppels
  • Potential transaction delays when tenants do not respond or identify unresolved disputes

5 Key Considerations and Best Practices

Use these estoppel certificate best practices to help avoid common mistakes:

1. Allow Enough Time

Allow adequate time for tenants to review and return estoppel certificates. The applicable deadline may be established by the lease, so the parties should follow the contractual requirements. Short turnaround windows can produce rushed or inaccurate responses.

If a tenant cannot meet the requested deadline, prompt notice can help the parties determine whether additional time or another solution is available. 

2. Attach Related Documents

Include a copy of the lease and relevant amendments with the estoppel request when appropriate. This can help the tenant confirm the information and reduce disputes about conflicting documents.

California landlords and tenants should also be aware of applicable commercial lease requirements when reviewing their lease documents.

3. Verify the Information and Wording

Tenants should verify each factual statement before signing, and so should the requester. Because signing an estoppel certificate can affect the tenant’s ability to later contradict the information provided, an inaccurate certificate can unintentionally waive rights or fail to identify landlord breaches.

In addition to checking the information for accuracy, review the certificate for clarity, including obvious typographical errors or ambiguous language.

4. Understand the Limitations

An estoppel certificate confirms facts as stated in the certificate; it does not necessarily amend the lease. If an estoppel conflicts with the underlying lease or contains mistakes, its legal effect can depend on the language of the documents, applicable law, and the circumstances surrounding the certificate.

5. Pay Special Attention to Key Tenants

Where a tenant is strategically important, such as an anchor tenant or major source of property revenue, it’s even more important to maintain open communication and allow sufficient time to address questions or discrepancies before closing.

If you’re looking for support managing your commercial property, we also offer legal oversight to ensure that your agreements are legally sound. We bring decades of experience and can take the pressure off of managing your tenants, from smaller agreements to your anchor tenants.

David Roberson
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