Almost all commercial leases contain a provision that the
landlord can call for the tenant to sign a document or certificate
detailing and confirming various lease related particulars. These
are commonly required by purchasers and lenders. They are often
referred to as estoppel certificates.
An estoppel certificate is founded on the principle of
promissory estoppel, the theory being that a party that executes an
estoppel certificate is thereafter "estopped" from being
able to assert a fact inconsistent with what is set out in the
certificate. The case law around estoppel certificates generally
deals with whether or not the signing of an estoppel certificate by
a tenant has achieved the intended result for the purchaser or
The recent case in the Supreme Court of British Columbia of
419219 Alberta Ltd v 238709 BC Ltd dealt with a situation where the
tenant who signed the estoppel certificate was relying on the
execution and delivery of this estoppel certificate to have
achieved the exercise of a renewal right.
The tenant (in fact a subtenant) operated a motel on the
subleased property. The sublease commenced January 1, 1978, and the
tenant received an assignment of the sublease on July 3, 2004. In
or about June 2010, the landlord acquired the head lease interest
and became the landlord of the tenant.
In connection with the landlord's purchase and perhaps the
financing of the purchase, the tenant delivered an estoppel
certificate to the landlord. The court notes the purpose of this
estoppel certificate was to show the prospective purchaser, and
perhaps those who are providing the funding, that the lease is in
good standing and that there are no significant disputes. The
estoppel certificate was prepared by the landlord.
At the time of the delivery of the estoppel certificate in 2010,
the sublease had a current term that ended December 31, 2012. There
were rights to extend, the next one for a period from January 1,
2013, to December 31, 2017, which required notice to be given at
least 6 months in advance (that is, on or before June 30, 2012) in
order to exercise that right.
The tenant did not give notice of the exercise of its renewal by
the required time. However, in the estoppel certificate delivered
in 2010 (well before the 6 month notice period) there was a
statement that the term of the sublease was amended to a period
commencing January 1, 1981, and ending December 31, 2037
(reflecting all of the potential, renewal periods).
The issue was whether or not the estoppel certificate
effectively extended the sublease such that a further and separate
notice within the time period provided was not required.
The court held that the estoppel certificate replaced the need
to give a separate notice at least 6 months prior to December 31,
2012, as the certificate confirmed the desire to extend the
sublease for the next 5 year term.
The court noted that the estoppel certificate was delivered
within the required timeframe, was in writing and contained the
correct information as to the premises and the parties.
However, the key considerations in finding for the tenant here
seem to be the following two points:
the landlord had prepared the estoppel certificate and
delivered it to the tenant for signing. The court found this as
evidence of a clear intention on the part of the landlord that the
tenant would be bound by the statements in the estoppel
certificate, including the renewal of the lease; and
it was recognized by the court that to hold that the renewal
right had not been validly exercised would be an "amazing
windfall" for the landlord. The renewal terms were at the same
rent. The tenant had invested a lot of money in the hotel on the
property when it acquired it. It would be a "multi million
dollar loss" to the tenant and a similar gain to the landlord.
This seemed to be a key factor for the court.
In fact, the court held that if that analysis was not accepted,
it would rely on the ability to grant relief against penalties and
forfeitures to find for the tenant.
Tenants of commercial properties have always been cautioned to
thoroughly review and undertake due diligence to ensure that the
statements in any estoppel certificate are accurate. Failure to do
so can result in a landlord arguing that legal rights have
This case shows that landlords must be equally careful in
preparing and providing estoppel certificates to tenants. A
landlord might, by what it includes in the estoppel certificate it
prepares and has a tenant execute, also be changing or effecting
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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