First Time Under Contract - Estoppel Agreement
Hi everyone! I'm under contract for a duplex and I have about 10 days left in the due dilligence period. The inspection is in 7 days and I've requested an estoppel agreement via my agent in the meantime. My agent doesn't seem to be familiar with working with estoppel agreements, so I'm hoping I could get some insight from the BP community.
Here's some quick background info..one of the units is vacant but the other unit (3bd 1ba) has 3 tenants that have been living in there for over 3 years and when I did the initial walkthrough the tenants look very....settled in (they are a bit messy and I'll make a separate post about that). There has never been any issues with the tenant's paying rent on time or being messy outside the unit.
A few reasons I want to request the estoppel agreement is because the copy of the lease provided to me:
- lists the wrong property address (probably was a simple mistake since it's one number off)
- lists language such as "if any damage should occur while tenant is under the lease a necessary amount will be deducted from the security deposit", but there is no mention of a security deposit amount on the lease
- the lease only has one tenant's name on it. I saw two other tenant's names on the copy of the rental application I was provided but I don't have any way of confirming those two names are the same names of the tenants that are currently living in the unity
Here are are my questions:
- If I didn't list any mention of the estoppel agreement in the contract that doesn't mean I can't ask the seller to provide this to the tenants and sign, but it does mean the seller can refuse. Is that correct?
- Do you typically have a lawyer review and estoppel agreement or is a general one pulled from online applicable? I found one that I slightly edited and I feel comfortable with it.
Any feedback is greatly appreciated!
Quote from @Mariah G.:
Your offer to purchase should include an inspection phase. During that phase, you can send any inspector you want even though they are not specifically mentioned. If you want to inspect the property for dark spirits, go for it!
An estoppel is your "inspection" of the lease terms. You could review the lease agreements - if they exist - but sometimes there are verbal agreements that haven't been recorded. The purpose of an estoppel is to verify what you are purchasing.
The estoppel is a form filled out by the tenant, then confirmed by the Landlord, then accepted by the Buyer. It's supposed to ensure there are no surprises after closing. For example, I often see Buyers purchase property thinking there is a $1,000 deposit but then the tenant claims it was actually $2,000 because they paid the last month's rent. How will you know? An estoppel certificate fixes this problem.
Some things it may include:
1. Tenant name, contact information, and address
2. Occupancy date
3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate
4. Are there any modifications to the written lease?
5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?
6. Current lease term (expiration date, month-to-month)
7. Current rent rate
8. Rent due date
9. Security deposit amount
You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchange "doc" with "pdf" for more options.
Here is an example and explanation: Sample Estoppel
Some have a lot of legal jargon but this document does not need to be so detailed. This is an important tool for anyone buying a tenant-occupied property.
