Do I need to receive an estoppel letter?

Question

I'm closing on a property next week. There is a tenant in place. Do I need to get an estoppel letter? Does the seller furnish the letter? I have already received a copy of the lease. There is a discrepancy with the security deposit. The written lease shows zero security deposit, but I was informed by the tenant that she put a $500 security deposit with the original lease. I have the second year of the lease, so the $500 may be listed for the first year and not transferred over (tenant has lived there two years).

Bryan O. · Answer

I wouldn't purchase without an estoppel letter. That is the due diligence that prevents the tenant coming back later and saying, "We made a verbal agreement that I get to park my leaky motorhome over there while I use it to breed cats. It's great since he also told me we have a 2 year lease at $75/month so we can afford to take vacations. By the way, you forgot to do the kitchen remodel that was promised if I paid 10%, which I already did..."

Not with an estoppel...

Tim W. · Answer

Estoppel letter is a must in my opinion. You need them to verify and agree to the lease and continuing forward under some type of legal paperwork. Trying to enforce a prior lease that is titled to another party wont be fun when trying to collect.

Tim Lindstrom · Answer

Since there is already a question about Security deposits,  you should definitely get an estoppel letter, to cover yourself.  I only had to do this once, so far, when I purchased a property with a tenant in place.  I just handed the estoppel letter to the tenant (he was there when I had my inspection).  Not sure if that is the way it is supposed to work,  but he filed it out,  and signed it,  then I had the seller read through and sign it.

Roy N. · Answer

@Konrad R.

You should get and estoppel and review any discrepancies with the Vendor before waving your inspection/diligence condition and proceeding to Close.

Normally you, or your agent, would prepare the tenant estoppels based upon information provided by the Vendor about the lease and any other facets of the relationship (perhaps tenant receives a rent discount in exchange for cleaning common areas).  Each estoppel would then be reviewed with the tenant to whom it pertains and, if necessary, amended.  The tenant would then sign the estoppel {which means "to speak truth"} to attest its contents.

Once you, or your agent, have collected the signed estoppels from all tenants, we normally provide a copy to the Vendor along with a summary of any discrepancies between the estoppels and the information provided by the Vendor.