Take Heed Before Signing Estoppel Certificate

October 26, 2012
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Q: When should I sign an estoppel certificate that an owner has presented me? Can I refuse to sign it—particularly if it changes the terms of my lease?

A: Owners often use estoppel certificates when they’re taking loans on their commercial property, refinancing their mortgages on that property, or selling it. When these documents bear your signature, they can serve as proof of the terms of your lease and as testimony that—to the best of your knowledge—the owner isn’t in default on its property. Signing an estoppel certificate may seem harmless, but if the certificate changes your lease’s terms, it could result in your loss of valuable rights.

Scrutinize an estoppel certificate before signing it. An estoppel certificate may contain detailed information about the terms of your lease, such as the amount of your rent or the termination date, as well as a statement that the owner is performing all of its obligations under the lease. By signing the certificate, you’re confirming that this information is true. But the information, either intentionally or erroneously, may be inaccurate. And if you sign and return an estoppel certificate that contains inaccurate lease information, the owner, lender, or buyer may argue that it was entitled to rely on the lease terms set forth in the estoppel certificate. If a court agrees, your signature has effectively changed your lease terms and possibly cost you valuable rights.