In the commercial context, purchasers, lenders, landlords, and even assignees or subtenants, will typically ask for an "estoppel certificate," a written document signed by a landlord or tenant (as the circumstances may warrant) detailing certain lease-related particulars.
While these certificates vary in form and content (depending on the nature of the transaction in question and the information requested by the party desiring the certificate), they will frequently verify lease commencement and expiration dates, the rent payment status ("current" or "past due"), the existence of any lease-related "defaults" on the part of either the landlord or the tenant, and pertinent details about lease modifications, extension and expansion rights, and other items.
Once these representations are finalized in written form, the party who has signed the certificate is precluded or "estopped" from retracting the information, and lenders, purchasers, lessors and other interested parties (who are the direct recipients of the certificate) may rely upon the representations therein contained.
A recent case decided by the Appellate Division, First Department, reinforces how these certificates can be of considerable benefit to tenants.
In JRK Franklin LLC. v. 164 East 87th Street, LLC., the property owner alleged that the tenant was in default of the lease for erecting a storage structure and metal shed. The tenant countered that the structure in question pre-existed the tenant's acquisition of its leashold interests. The timing of this installation was relevant in that, prior to acquiring its lease, and as part of the tenant's due diligence, the tenant had secured an estoppel certificate from the landlord which provided, in part, as follows:
To the best knowledge of Ground Lessor, there is no existing default by Ground Lessee in the performance and observance of Ground Lessee's obligations under the Ground Lease ... To the best knowledge of Ground Lessor, no event has occurred which, with the giving of notice or passage of time, or both, would constitute a default by Ground Lessee under the Ground Lease.
A New York County Supreme Court judge refused to enforce the estoppel certificate, granted the landlord summary judgment, and found that the storage structure (erected by the prior tenant) was a lease violation which warranted the tenancy's termination. On appeal, the appellate court modified that outcome and rescinded the landlord's victory, finding as follows:
The motion court erred in failing to enforce the estoppel certificate ... [T]he record evidence establishes that [landlord] made representations in the certificate contrary to those it asserts here, that [landlord] intended such representations be acted upon, that [tenant] detrimentally relied upon those representations, and that [landlord] at least had constructive, if not actual, knowledge of the true state of affairs ... In addition to the above, [landlord] had a duty and the ability (right of entry) to investigate before voluntarily certifying an absence of any tenant lease defaults ....
For a copy of the Court's decision, please click this link:
For an ABA publication which provides commentary on the "use and misuse" of estoppel certificates, please click the following link: http://www.abanet.org/rppt/publications/edirt/2000/summer2000/page1.html