Estoppel certificates apply only to commercial real estate?

Commercial Real Estate Investing
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Estoppel certificates apply only to commercial real estate?

Larry Bowers
Member since 2018 · 62 posts · 8 votes

I read about estoppel certificates and get the concept. Would it be out of line to request them as a buyer in a residential (fourplex or less property), or is that overkill and/or just not done?

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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
8y

Estoppel you are verifying what is in the lease is accurate and that there are no written or spoken agreements otherwise. 

Definitely you want to get it and notarized. That way seller cannot forge and say tenant signed it and tenant cannot claim they didn't sign it as notary witnessed it after being provided valid ID of person signing.  

It's not absolute just one mechanism among many with due diligence and a purchase and sale contract to try and keep the seller honest. 

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    8y

    Estoppel you are verifying what is in the lease is accurate and that there are no written or spoken agreements otherwise. 

    Definitely you want to get it and notarized. That way seller cannot forge and say tenant signed it and tenant cannot claim they didn't sign it as notary witnessed it after being provided valid ID of person signing.  

    It's not absolute just one mechanism among many with due diligence and a purchase and sale contract to try and keep the seller honest. 

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  • David Song
    Real Estate Broker · Redwood City, CA · Member since 2014 · 679 posts · 888 votes
    8y
    No. It applies to any property that is leased and for sale. You need it to verify any security deposit, rent, utility arrangement etc, from tenant. The escrow will also need that info to allocate funds.
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  • Larry Bowers
    OP
    Member since 2018 · 62 posts · 8 votes
    8y

    I should have been clearer about what I want to know.

    In this case, I mean a residential property that is rented that is being bought for purposes of keeping as a rental. Will the real estate agents involved and the seller think that asking for an estoppel certificate on a SFH rental is ludicrous? Or is just not done? @Joel Owens @David Song

    @David Song

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  • David Song
    Real Estate Broker · Redwood City, CA · Member since 2014 · 679 posts · 888 votes
    8y

    yes. A residential property that is being rented. The previous landlord, I.e, the seller, or its listing agent, shall obtain a tenant estoppel from the existing tenant. That is required.

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  • Larry Bowers
    OP
    Member since 2018 · 62 posts · 8 votes
    8y

    @David Song

    Ok, thanks. I sold a 4-plex building a long time ago, but I just had to provide the lease with the tenants. The residential tenants in this C- property were never involved. 

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  • David Miller
    Attorney · Durham, NC · Member since 2016 · 224 posts · 126 votes
    8y
    While a tenant estoppel is a best practice, customary practices vary across different markets. For example, if you are buying a 300 unit multifamily apartment complex, getting estoppels from every tenant is highly unlikely and in many cases not practiced. The same might be true for a single family residence, in part because residential leases (unlike a lot of commercial leases) often do not require tenants to produce estoppels upon request.
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  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    8y

    @Larry Bowers I’ve obtained one on a residential rental property I purchased before. On that particular property I had a reason to suspect there was something suspicious between the tenant and the seller so I wanted to clarify exactly what the terms of their agreement was before I closed. But you can absolutely do one on any property - residential or commercial. 

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  • Larry Bowers
    OP
    Member since 2018 · 62 posts · 8 votes
    8y

    @Kyle J. Now I know I can ask for them if I am suspicious with residential rentals. "Trust but verify" as Reagan said. 

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