Multiple Choice Question: When should you as the real estate agent be asking for a tenant estoppel certificate? Pick the best answer:

A. When you are taking a listing for a lease, but the property has an existing tenant.
B. When you are taking a listing for a sale, and the property has an existing tenant.
C. When you are the seller’s agent, and your client is selling the property subject to an existing tenant.
D. When you are the buyer’s agent, and your client is buying the property subject to an existing tenant. 

Answer: Answer A is wrong. A Tenant Estoppel Certificate, such as C.A.R.’s standard-form TEC, is a written verification of the terms of a lease agreement as according to the tenant. When you are taking a new listing for a lease, you are going to find a new tenant for the property. In that situation, you generally do not need the existing tenant’s verification of the terms of the existing lease.

Answer B is not the best answer. When a tenant occupies the property you have listed for sale, the buyer may or may not be taking the property with the existing tenant remaining on the premises. If the existing tenant will not be staying after close of escrow, a TEC is generally unnecessary.

Answer C is not the best answer. It’s true that when you sell a property with the existing tenant remaining on the premises, the seller and buyer should enter into a C.A.R. Tenant Occupied Property Addendum (TOPA). If the box in paragraph 2E(3) is checked, the seller must get a TEC signed by the tenant, and deliver the completed document to the buyer for review. But Answer C is not the best answer, because the box in paragraph 2E(3) might not be checked, in which case, the seller is not required to get a TEC.

Answer D is the correct answer. When a buyer buys a property subject to an existing tenant, the buyer can review the lease agreement to see the terms of the existing lease. But sometimes the seller-landlord and the existing tenant may be at odds with each other, and getting a TEC is a way for a buyer to confirm that the tenant agrees with all the terms of the lease as stated in the lease agreement. Perhaps the lease says that the tenant has only a $5,000 deposit, but the tenant claims on the TEC that there’s another $1,000 pet deposit. Or perhaps the lease says that the tenant is to pay $7,000 per month in rent. But on the TEC, the tenant says that the landlord verbally agreed to only $6,500 per month, because the tenant is taking care of the yardwork. A buyer would want to know any discrepancies between the lease and the TEC before closing escrow on a property with the existing tenant remaining on the premises.

Copyright© 2023 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of April 10, 2023. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals. Written by Stella Ling, Esq.