An estoppel certificate is a signed statement in which a tenant, borrower or other party confirms the current facts of a lease or loan: the rent, the term, the deposits held and whether any default exists. Once signed, the party is estopped, or barred, from later contradicting those facts against anyone who relied on them.
What does an estoppel certificate confirm?
A tenant estoppel restates the lease as the tenant understands it. It confirms the commencement and expiration dates, the current base rent and the date through which rent is paid, the security deposit held, any prepaid rent, and any renewal, expansion, termination or purchase options that remain unexercised.
It also confirms the state of the relationship. The tenant states whether the lease has been amended, whether the landlord is in default, whether the tenant holds any offset, credit or claim against rent, and whether the tenant has assigned or sublet the space. A clean certificate says the lease is in full force with no amendments and no defaults.
Illustrative example:
| Item | Landlord’s lease file | Tenant’s certificate |
|---|---|---|
| Monthly base rent | $10,000 | $10,000 |
| Lease expiration | December 31, 2030 | December 31, 2030 |
| Security deposit | $20,000 | $20,000 |
| Unexercised options | One five-year renewal | One five-year renewal |
| Landlord default | None | Roof repair outstanding since March |
| Prepaid rent | None | Two months, paid under a side letter |
The rent, term and deposit tie out. The default claim and the prepaid rent do not, and both change what the lender or buyer is stepping into. A side letter or an unrecorded amendment surfaces here, before closing rather than after.
How does a tenant estoppel differ from a borrower estoppel?
A tenant estoppel runs from the tenant to the landlord and to whoever the landlord designates, usually a lender or a buyer. It verifies the income stream the property produces, which is the collateral behind the loan and the value behind the purchase price.
A borrower estoppel runs from the borrower to the lender or to a party the lender designates, such as a loan purchaser or a securitization trust. It confirms the outstanding principal balance, the interest rate, the date through which interest is paid, the maturity date, and that the borrower holds no defense, offset or counterclaim against the lender. Lenders also deliver estoppels to borrowers on request, confirming the same loan facts from the other side.
Why do lenders and buyers require estoppel certificates?
A lender underwriting a loan sizes it on the leases. The rent roll and the operating statement come from the borrower; the estoppel comes from the tenant, an independent party with no reason to overstate the rent. Estoppels from the major tenants confirm that the income the loan depends on is real, current and unencumbered by disputes.
A buyer has the same interest. The purchase price capitalizes the income, and the estoppel confirms that income exists on the terms represented.
When a loan is sold or securitized, the borrower estoppel does for the loan what the tenant estoppel does for the lease. A CMBS trust or loan purchaser relies on it to confirm the balance and the absence of borrower claims before taking the asset.
What does the loan agreement require of the borrower?
Loan documents carry estoppel obligations in two places. The first is the borrower’s own certificate: on the lender’s request, the borrower must deliver a signed estoppel confirming the loan facts within a stated number of days. The second is the tenant estoppel clause: the borrower must request and use reasonable efforts to obtain estoppels from tenants when the lender asks, usually with a cap on how often the lender may ask outside a sale, refinancing or default.
These are covenants, and missing the delivery deadline is a breach like any other. Leases mirror the loan: most require the tenant to deliver an estoppel within a stated period after request.
The response period, the request frequency and the form of certificate differ by loan and by lease, and a borrower with many loans needs each one on record.
How estoppel certificates show up in LoanBoss
Lease requirements, lender approval requirements and post-closing obligations are among the critical loan provisions the LoanBoss team abstracts from each loan, so the estoppel delivery clause, its response period and the lender’s request rights sit in the loan abstract beside the loan’s other critical dates.
Frequently Asked Questions
Who signs an estoppel certificate?
The party whose position it describes. A tenant signs a tenant estoppel to confirm its lease; a borrower signs a borrower estoppel to confirm its loan.
What happens if a tenant refuses to sign an estoppel?
Most leases require delivery within a stated period after request. A tenant that does not respond is often deemed to have confirmed the landlord’s version of the facts, and a refusal is a lease default under many leases.
Is an estoppel certificate legally binding?
Yes. The signer is estopped from later asserting facts that contradict the certificate against a party that relied on it.
How often can a lender request an estoppel?
The loan agreement sets the frequency. Borrower estoppels are usually available on request with a stated response period; requests for tenant estoppels are commonly limited to a number of times per year outside a sale, refinancing or default.
Does an estoppel certificate replace the lease?
No. The lease governs the relationship; the estoppel confirms its current state. Where the two conflict, the certificate binds the signer as to the facts it states.
Related Terms
- Loan Abstract
- Covenant
- CMBS
- Maturity Date
- Lender Consent Requirements: Leases, Transfers and Management Changes Your Loan Documents Control
- The 400-Field Loan Abstract: What a Complete CRE Loan Abstract Contains
Part of the LoanBoss CRE Debt Glossary. For hedging-specific terms, see Pensford’s resources.
Sources
- LoanBoss CRE Debt Glossary