The main effect of an estoppel agreement is to bind both the landlord and the tenant to all statements and estoppel clauses detailed in the document. However, its contents are legally deemed to be true even if they are indeed erroneous, binding both parties to an agreement that is different from the one initially intended. Therefore, mistakes can have major and unintended legal implications. In cases where mistakes are made, they usually get brought to the attention of the courts due to a disparity between the lease and the estoppel.
For a better understanding, let’s look at an example. The lease states that the tenant is required to give six months’ notice if they wish to extend their lease, whereas the estoppel certificate may incorrectly state that twelve months’ notice is required. The tenant gives their landlord eight months’ notice, but the landlord raises a dispute because this falls four months short of what is stated in the estoppel.
The tenant then refuses to vacate the property per the terms of the lease, so the landlord files an eviction lawsuit. At this stage, the disagreement is brought to the attention of the courts, which will look over both written documents. Since the tenant is required to give twelve months’ notice according to the tenant estoppel certificate, this is what would be honored, despite the fact that it was incorrectly written in the estoppel agreement initially.
This is just a fictional example, but many real-world cases also prove the enforceability of estoppel certificates in the United States. A similar situation occurred in California in the year 2000 in the Plaza Freeway Ltd. Partnership v. First Mountain Bank case. In this case, the tenant wanted to extend the commercial property lease, which, per the lease, required twelve months’ notice.
However, the estoppel agreement had a lease expiration date, which meant the notice provided by the tenant was not enough. The courts ruled in favor of the landlord as per Section 622 of the California Evidence Code, which states that “the facts recited in a written instrument are conclusively presumed to be true as between the parties thereto, or their successors in interest.” The California appellate court went on to explain their decision for the defendant, stating that “A contrary conclusion would defeat the purpose behind the widespread practice of using estoppel certificates.”