Commercial Tenant Estoppel Certificate

My husband and I just purchased our first investment, rental property, which is a one story duplex. Currently, both units have tenants in place however their leases expired so they are going month to month right now. We plan to renew their leases but we are wanting to raise the rent amount. We had our realtor give us comps for the area and we found out that the current rent is $150 under the average amount. I was going through the documents we received from the previous owner, which was only one expired lease for one of the units and a Commercial Tenant Estoppel Certificate for the other unit. The certificate states that the current tenant has the option to renew the lease at the rent rate of $450 a month. Based on the date, this was done right around the time we were fixing to close on the property. The tenant signed it but the previous landlord did not sign it. So, I have a few questions regarding this issue.

  1. Since no lease has been signed between myself and the tenant, is this certificate even valid? I read somewhere that if one of these certificates are done, their needs to be a clause or an addendum in the lease about it.

  2. It says Commercial Tenant Estoppel Certificate and since this is a residential residence, shouldn’t it say residential? If so, is this certificate valid?

  3. Do I have to honor this document even though I did not agree to it?

  4. Do I, as the owner, have any legal rights regarding this situation?

  5. Is their a way where I don’t have to abide by what it states, considering that I am the owner and the certificate was agreed upon with the previous owner?

Estoppels just confirm the tenant’s understanding of the lease.

If you received the estoppels and approved them before closing, you should honor the misunderstanding.

It’s really unprofessional, if slightly dishonest, to both receive the estoppels; ostensibly approve them; and then look for ways to ignore them, when they become inconvenient to your objectives.

The question is why the previous owner did not have a valid lease with the tenant, and why the estoppel certificates didn’t expose this detail.

So, actually the estoppel(s) were invalid, since they didn’t reflect reality.

Now, you have ‘nothing’ valid, and it’s now up to your negotiating ability, rather than your legal position.

I would now simply ignore everything told you up to this point, including the imaginary terms outlined in the estoppel(s), since they were basically fictitious.

The fact that you didn’t bother to catch this is a MESS you’ve brought on yourself.

Meantime, the terms ‘commercial’ vs. ‘residential’ have zero influence on the meaning and intent of the estoppel(s). That’s a non-starter.

What you do, when the legitimate leases have actually expired, is issue the tenant a new lease with whatever terms you want, including the lease amount.

What I’ve done in the past after purchasing a building without estoppel certificates of any kind, was to present every occupant in the building a brand new lease with new terms and rents. I informed each resident that they had three days to return the signed lease to me, with every occupant’s signature, or consider this to be a 30-Day Notice To Quit.

I actually included a 30-Day notice with the contract offers, as a separate notice, and explained that if the lease was not acceptable, then the notice would go into effect once the lease offer expired.

Everyone signed the lease at the new rates. Not a big jump in rents, but it was a jump.

Also, it put everyone on the same page, so that nobody could claim the previous manager/owner agreed to let them do, blah, blah, blah. It just pulled the rug out from under all the little side agreements that may have been established between the previous owner/manager and themselves. It was like a fresh start.

BTW, this was not an eviction notice, per se, and should never be referred to as that, because tenant’s understand “Eviction Notices,” and consider them threatening and offensive. So we were careful to refer to them as “30-Day Notice To Vacate,” or “Notice To Quit,” etc., but NOT “Notice To Evict,” or “Notice Of Eviction,” etc.

There may be laws in your state about how many days you must give a tenant, if they’ve lived longer than a year in your property. In CA it’s a 60-Day notice in that case.

The issue was, I literally ignored all the extant leases in the building, and simply issued new ones with the contingent notice to vacate. I would handle any objections/complaints on a case-by-case basis, and negotiate what I had to with any one tenant.

In this case, I had 100% compliance (18 new leases in this case).

Hope that helps. Next time, personally confirm the estoppel certificates, so that you’re not horsing around with ‘he said, she said’ crap, which is likely what you’ll face in this case.

P.S. If the tenant has no current, valid lease, than you just have the tenant sign your brand new lease, and call it a day. Otherwise, you just wait until the old lease converts to a month-to-month agreement, or expires altogether, and then offer the resident a new lease, with a contingent 30-day notice to vacate. Works for me.