What Is Estoppel in Commercial Real Estate? Estoppel Certificates 101

An estoppel letter is a legal document outlining the terms of a leasing contract involving a tenant and landlord. The tenant and landlord, or their respective representatives, sign the legal document, affirming that the information provided is accurate and correct.

Commonly requested during the underwriting or due diligence period of a commercial real estate deal, an estoppel certificate is a legally binding written statement of the lease agreement terms between a landlord and tenant, including the length of the lease, the monthly rent amount, and any special provisions or conditions.

Estoppel certificates help prevent either party from bringing legal action against the other after closing.

Estoppel in real estate transactions can resolve contractual disputes, such as when a property owner wants to avoid liability if a tenant defaults on the rental agreement. The document also confirms the leasing terms to third parties like a lender or potential buyer.

What Is an Estoppel Certificate?

An estoppel letter is a legal document outlining the terms of a leasing contract involving a tenant and landlord. The tenant and landlord, or their respective representatives, sign the legal document, affirming that the information provided is accurate and correct.

Once signed, the tenant estoppel certificate creates a binding agreement between the parties that can be used as evidence in court if necessary.

It’s often requested by a prospective buyer or lender who wants confirmation about the terms of the lease agreement, such as the amount of rent being paid and any outstanding issues that could impact the sale or financing of the property.

While estoppel certificates are not required by law, they are often requested by commercial lenders as a way to protect themselves from potential legal issues down the road. A property owner should consult with an attorney specializing in real estate law for legal advice when creating a tenant estoppel letter.

What Are the Primary Types of Estoppels?

There are three main types of estoppels: equitable estoppel, judicial estoppel, and promissory estoppel. Equitable estoppel is when one party reasonably relies on the actions or words of another party and, as a result, suffers some form of harm.

For instance, suppose a tenant signs a lease for an office building, which includes a clause that the tenant cannot sublet the office to another tenant. If the tenant later decides to sublet the building, the new tenant could then sue for breach of contract, arguing that the tenant violated the terms of the original lease agreement.

On the other hand, judicial estoppel prevents a person from asserting a claim in court that is inconsistent with a claim they previously asserted in court.

In commercial real estate, judicial estoppel can come into play if a tenant sues their landlord over a lease issue, then tries to claim in another court proceeding that the lease does not exist or its terms do not bind them.

Promissory estoppel is similar to equitable estoppel but requires an unambiguous promise made by one party, which leads to an adverse outcome for the other party. For example, the tenant may claim promissory estoppel if their landlord promises a lease renewal at the end of the term at the same price but later tries to increase the rent for the renewal period.

What Is the Purpose of an Estoppel in Real Estate Deals?

In the commercial real estate industry, estoppel can verify information about a lease agreement for individuals or entities considering entering a transaction involving the leased property, such as a sale or refinancing. Relevant information often listed on a tenant estoppel certificate includes:

  • The date the lease began
  • The end date of the lease
  • The terms of the lease, including any options to renew or terminate
  • The amount of the security deposit and monthly rent payments
  • The contact information of the property owner
  • Whether or not there are any pending litigation matters between the landlord and tenant
  • Any other obligations of the tenant under the lease agreement


In addition, estoppel sometimes functions as an effective marketing tool when trying to sell or finance a commercial property. When presented with an estoppel letter, potential real estate investors or lenders have proof that a paying tenant is occupying the property with a valid lease agreement, which implies a steady cash flow.

Overall, an estoppel certificate helps provide a degree of certainty for the landlord, potential new tenants, and any third parties, such as a lender, in regard to the lease agreement terms. This helps to avoid any disputes concerning what was agreed to in the lease.

Who Needs a Tenant Estoppel Certificate?

In general, an estoppel letter is requested by a tenant or lender when entering into or continuing a commercial real estate lease agreement or when one party is selling or transferring their interest in the property to another party. For tenants, the certificate confirms the terms of the leasing contract, including any unpaid rent or other charges that may be due.

Doing this can provide peace of mind to the tenant, knowing they will not be responsible for any additional costs associated with the property beyond what is specified in the lease agreement.

Plus, the signed statement verifies that the landlord has not made any amendments to the lease agreement terms that would affect the tenant’s rights or obligations.

Estoppel protects the lender by confirming the lack of outstanding liens on the property that could jeopardize their interest in the event of a default.

For example, if it turns out that the tenant was actually behind on their rent payments or that the property needs significant repairs, the lender could argue they were misled by the property owner and seek financial compensation.

What Are the Benefits & Limitations of an Estoppel?

Estoppel certificates are often used in commercial real estate transactions as a way to protect the prospective purchaser from any false statements made by the seller about the property. The main benefit of an estoppel certificate is that it can offer clarity and certainty about the terms of a lease agreement.

For landlords, an estoppel certificate demonstrates that the tenant has agreed to specific terms, such as paying rent on time and not making any changes to the property without the landlord’s approval. This can be helpful if the tenant later tries to dispute those terms.

It also can shield the tenant from potential liability if the landlord later tries to assert claims against the tenant that are not covered by the lease. Despite the advantages of an estoppel certificate, there are also potential drawbacks.

The process of preparing this document can be expensive and time-consuming. The certificate itself may only cover some possible claims that either party could assert.

Another limitation is that an estoppel letter can only be created with the consent of both parties to the lease agreement. If one party refuses to sign an estoppel, the statement cannot be enforced against them.

What Are Common Misconceptions About Estoppel Certificates?

One common misconception about an estoppel letter is that it is relevant only in commercial real estate transactions. However, estoppel certificates can be applied in any type of deal where there is an agreement between two parties.

Another misconception involves the certificate serving as a guarantee that the tenant will not default on their lease. However, an estoppel certificate simply states that the tenant is not in default of their lease agreement to the best of the property owner’s knowledge.

For example, if a tenant is considering entering into a lease with a new owner, the tenant may request an estoppel certificate from their current landlord to verify the terms of their current lease agreement.

Lastly, some believe an estoppel certificate is only necessary when a property is being sold. While an estoppel certificate could be helpful in this situation, it can also prove useful in other contexts, including when a landlord is seeking to refinance the property.

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