An estoppel certificate is a signed statement by one party that certifies the statements of another party are valid. They are commonly used in the due diligence process to fact-check the seller's information when buying real estate. There are two main reasons a buyer will ask third parties to complete an estoppel certificate:
Continue reading to learn everything about estoppel certificates and their applications.
You inherit all title claims on the address when you buy a property in Canada. This means you could be liable for paying thousands of dollars in unpaid condo fees to the condo corporation. An estoppel certificate is essential because it provides written information about any outstanding claims or interests that may affect the title to a property.
Typically a buyer will have the tenant or condo corporation (if buying a condo) complete an estoppel certificate to verify the seller doesn't owe them any money. This information simultaneously allows the buyer to understand if they are acquiring any debts and protect them. The purpose is to protect Homebuyers. Another way to ensure you are protected when buying a home is to understand how home insurance works in Canada.
Usually, the seller of a property will pay for an estoppel certificate through their lawyer. The certificate costs between $200-$350 in Canada and is sent to the buyer's lawyer. Although it's not mandatory to have an estoppel certificate notarized, it does provide extra security.
Canadian real estate investors typically require this certificate when acquiring an investment property. The tenant signs this contract to verify their rental agreement with the landlord. It confirms vital details to the buyer, such as the status of their lease, rent amount, security deposit details, or other specific conditions.
Additionally, the estoppel certificate might allow the tenant to explain any claims against the landlord that may influence a buyer or lender's decision to proceed with the proposed transaction.
A landlord will typically ask their tenant to sign the contract if:
As a tenant, an estoppel certificate can expose you to liability risks if you're not careful. As a result, any estoppel request should be approached cautiously and carefully reviewed.
There is likely a provision in your lease agreement that requires you to complete an estoppel certificate at your landlord's request. Typically you will be required to return the contract in 10 days. Otherwise, your landlord may complete it on your behalf. Occasionally, you may have to pay a financial penalty for failing to return the document on time.
Take time to go over the estoppel certificate's terms before signing. It's a good idea to have a lawyer review it for you if this is your first time being asked to complete the form. If you have any claims on the property, such as unreimbursed maintenance, be sure to include them on the form. You should also protest any item that would impose more responsibilities, change lease terms or limit your rights under the lease.
The purpose of a tenant's estoppel certificate is to highlight and verify the current lease agreement terms. Some essential items to include are:
This certificate is typically required when buying a condominium in Canada. It is a contract between a condo owner and their condo corporation to authenticate critical information.
A condo estoppel certificate is essential for two reasons:
The condo estoppel certificate should focus on details about the condo fees. Potential buyers should know about fee contribution expectations and any increases to the fees. At a minimum, the certificate should include:
According to section 43.2 of the Alberta Condominium Property Act, a condo corporation must certify an estoppel certificate within ten days. In particular, it must be clarified;
The Ontario Superior Court of Justice (1960529 Ontario Inc. v. 2077570 Ontario Inc.) ruled that an estoppel certificate can override a lease agreement. In the lawsuit, the tenant signed off on the certificate and forgot the right of first refusal to purchase the property. The landlord was then able to demolish the building and forgo the tenant's right of refusal.
The moral of the story is always to understand what you are signing and have a lawyer review it if necessary. Also, make it clear that the estoppel certificate does not change or remove any of your tenancy rights in your lease.
Under Section 59 of the BC Property Act, you can find an estoppel certificate called "Form B: Information Certificate." The form is typically requested when buying a condo, as will all provinces. An owner, purchaser or authorized individual can request the form from the strata corporation who has seven days to provide one. A strata corporation can charge $35 for the form and up to $0.25 per page of photocopying.
The strata corporation must disclose the information below on Form B:
In 2015, a Superior Court of Quebec decision ruled a tenant liable for mistakes they made while completing an estoppel certificate. Although the lease was supposed to terminate in March 2014, the tenant signed the certificate, stating that it ended in November 2014.
The tenant moved out when the new landlord took over the property around March. However, the tenant had signed an estoppel certificate for the new landlord, validating they would move out eight months later in November. As a result, the new landlord successfully sued the tenant for the eight months of rent owed, as highlighted in the estoppel certificate. In many cases, an estoppel certificate can override your lease agreement, so always be careful to ensure the information is correct.
An estoppel certificate is a legal contract between a tenant and landlord that confirms the tenant's lease agreement. As a tenant, you should review and understand the document before signing it. By signing an estoppel certificate, you may be agreeing to liabilities and responsibilities that weren't part of your original lease agreement. If you have any questions or concerns, be sure to discuss them with your landlord or lawyer before proceeding.