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What is Estoppel in Real Estate?

Richard Latimer

April 11, 2022

An estoppel letter or certificate is almost always part of the closing process when a unit in your association is sold. Any fees or levies that the seller owes to your association are included in this document.

A letter of estoppel specifies that a certain amount of money is necessary in order to acquire a particular item. This information will be used by the title company and closing agent to compute closing adjustments and title insurance.

As a result of the estoppel letter, you will not be able to claim that a different amount is due to you as an organization.

Two goals are served by issuing an estoppel letter: to expedite the closing process and to guarantee that all assessments have been paid in full.

Due to Florida's requirement that buyers and sellers be equally accountable for dues and levies, this documentation allows for accurate proration of contributions between the buyer and seller.

What to Include in an Estoppel Certificate

According to Florida law, below is a complete list of everything you need to include in an estoppel letter. This may be different depending on your state, so kindly check on that.

  1. The date of issue;
  2. The name(s) of the parcel owner(s) as they appear in the association's records:
  3. Address and parcel identification number:
  4. In the association's books and records: parking or garage spot number
  5. Attorney's name and phone number if the account is late and has been assigned to a collection agency. These details are being provided free of charge.
  6. There is a fee to prepare the estoppel certificate and send it to you.
  7. The requestor's name
  8. Assessment data and other relevant data
Forms And Certificates

What Does Association Estoppel mean?

 If you are an organization and someone requests an estoppel letter or certificate, you have a legal responsibility to provide it within ten working days of receiving the request unless an exception applies.

Any member of the board of directors approved agent or authorized representative may submit this form on the organization's behalf.

Estoppel letters must be drafted correctly, which is crucial in the legal world. You should not rush back to the title company to return the estoppel certificate in order to prevent making a mistake. The great majority of sellers, on the other hand, have paid their neighborhood association dues and assessments in the vast majority of cases.

Delivery of the certificate might take place in person, by email, or via the regular postal system. If you get an estoppel letter online or via mail, you have 30 to 35 days to utilize it before it becomes void. 

Charging for an Estoppel Letter

Since 2017, estoppel certificates issued by communal groups have been subject to these restrictions, which were previously unenforceable.

In addition to the $250 maximum fee, delinquent accounts may be subject to an additional penalty of up to $150 for each month they are late. In the event that you must produce the certificate fast due to a time constraint, charging an additional $100 is acceptable.

An Association Estoppel should include most of the following information.

  • In addition to the HOA or COA, there may be other organizations that administer the property, such as a master association or a golf club, or a sub-association.
  • Monthly, quarterly or yearly payments are all acceptable methods of making future dues obligations to the organization clear.
  • There should be a collection payment letter from the association's attorney if the property is in collections for unpaid dues and fees, which provides a breakdown of fees and/or interest incurred as a result of default.
  • Amounts due for anticipated special assessments and contributions to community development.
  • Background checks and/or applications for buyer approval are among the buyer criteria needed to complete the transaction.
  • As a result of the Right of First Refusal, an association may buy a piece of property before the owner has the opportunity to sell it to another party.
  • Details about who is responsible for setting up and paying utility bills, such as water, garbage, cable television, and/or sewage for the residence.
  • Any extra fees or charges for facilities such as health clubs, swimming pools, or golf courses may be necessary.

What is a Tenant Estoppel?

When a landlord checks the terms and circumstances and current status of their lease, it is known as tenant estoppel.

This document is generally required during the due diligence process of purchase as well as during the underwriting of a commercial real estate loan in most commercial real estate leases.

What is the significance of this? A prospective investor or lender is interested in a property's cash flow, and the tenant estoppel shows that flow.

The term "estop" simply means to prohibit, and a certificate that prevents the tenant from adopting a position counter to what is mentioned in their certificate consequently is tenant estoppel.

What’s in a Tenant Estoppel Letter or Certificate?

While the specifics of a tenant estoppel letter or certificate might vary, the following things are often included in a standard tenant estoppel document:

  • The day the lease begins.
  • The date on which the rent is due and owing.
  • That neither the landlord nor the renter has made any defaults.
  • In the event that any party defaults, a description of these defaults are necessary.
  • Checking to make sure the lease has not been altered and is still in effect.

If the lease has been changed, the estoppel certificate will contain a statement proving that the changes have been made.

Even while tenant estoppel letters and certificates are often required in most leases, there is some flexibility in the specific information contained in these documents.

As a starting point, the following is an excellent list.

Conclusion

It is common to encounter the tenant estoppel problem during due diligence and loan underwriting, and it is one that must be handled. It is used to get insight into the landlord-tenant interaction from the perspective of a third person who is not involved in the transaction.

In this article, we attempted to convey the fundamentals of tenant estoppel in a factual way.

How to get an Estoppel letter for your closing

Buying a home isn't just about making a phone call to the neighborhood organization and getting a verbal confirmation that you're interested in acquiring a unit. To verify if any unpaid dues are owed, you'll need the certified association information.

Closing expenses for a conventional closing often include the cost of this document, which is thus considered the responsibility of the seller in most cases.

This report, as well as the boundary survey and municipal lien search, will be collected by the settlement agent together with the other things required on the title commitment and closing contract.

Researching an HOA foreclosure auction for an investment property may be done online if you don't want to go through a formal closing and want to acquire this information yourself. 

Here are some steps you can take to properly order an HOA closing statement:

  • 1.     Use the legal description of the property to determine which associations are in charge of it.
  • 2.     Look for the business and contact details of the association in the online database of business entities maintained by your state.
  • 3.     Request the paperwork from the association, their management business, or their lawyer.
  • 4.     Verify if the address of the unit is within their purview.
  • 5.     Ask about the costs and turnaround time for the information.
  • 6.     You should also inquire whether the address is connected to any other organizations.

Find the Legal Description

The legal description of a property provides information on the size and location of the property, which is useful in identifying the property in issue. It is possible to get the legal description of a property from the website of a property appraiser.

In contrast to a postal address, the legal description is specific to the property and cannot be found anywhere else. Therefore, the new owner's title will be clearly shown on the paper as a result of this change.

For platted subdivisions, lot and block numbers, as well as the name of the subdivision, maybe all that is required; however, for unplatted properties (empty lots), it can become more complicated by mentioning bodies of water and nearby highways, as well as other geographic landmarks, such as railroad tracks.

It is termed "metes and bounds" in this context, and it defines the procedures required in drawing the boundary lines of a piece of land using a starting point, an ending point, and an angle as reference points.

Additional Questions to Ask

Once an association has been verified, here are some further questions to ask:

  • In order to get estoppel, how much does it typically cost?
  • Second, how long will it take to finish the task in question?
  • Are there any expedited options?
  • The payment for the estoppel (not association dues) should be sent to the following address:
  • Is this address associated with other groups? Get in touch with them if this is the case.
  • Is the buyer need to be pre-approved by the seller before closing? Start the procedure by requesting a duplicate of the application.
  • Is the property in a collection? If so, how can I get in touch with your firm's legal counsel? 

Why It’s Important to Get It Right

It is critical for title companies to have estoppel letters because if they are unable to verify any outstanding assessments, the new unit owner will be held liable. It is possible that the title insurance company may be sued. As a consequence, estoppel is guided by established legal principles.

If you violate even one of these standards, your organization may face legal consequences. You won't have to worry about remembering everything that goes into your certificate if you use a service like this.

What happens if your deal falls through?

If a real estate contract is terminated in some jurisdictions, you may be entitled to compensation. Learn if this is the case in your state by chatting with an experienced real estate professional.

If an organization or management firm in Florida receives an estoppel request, they are required to reply in accordance with certain criteria. The cost of the HOA estoppel letter may be claimed as a refund from the association.

Sad Business Man Because Of Estoppel

If you want to make any requests or submit any payments in your region, be certain that you are aware of the limits in your area before proceeding. You run the danger of losing hundreds of dollars on information about a property that you do not really own if you do not have this protection.

FAQ

What is the purpose of an estoppel letter?

When a lease already exists and is free of defaults, an estoppel certificate or letter shows that another party has benefited from the lease. It is signed by the party that signed the lease and is legally binding. According to the information in the file, the rent was paid on time and in full on a regular basis.

What does it imply when you talk about an "estoppel fee"?

The homeowners association charges a fee known as an estoppel fee in order for the title firm to validate your account status. Look into if you're current on your payments, whether you've dropped off the grid, or if the vendor has imposed any extra fees. 

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