A commercial tenant that signed an estoppel certificate containing an incorrect lease termination date was bound by that date, and a later attempt to exercise an option to renew its lease was therefore untimely, the California Court of Appeal has held. Plaza Freeway Limited Partnership v. First Mountain Bank, 00 C.D.O.S. 4746 (June 13, 2000).
Plaza Freeway Limited Partnership, the plaintiff, and First Mountain Bank, the defendant, were successors in interest to the original landlord and tenant of commercial real property under a 25-year ground lease agreement. At the time of plaintiff’s purchase of the property, the defendant signed and delivered an estoppel certificate, which stated the termination date of defendant’s ground lease was October 31, 1998.
The plaintiff claimed that defendant was estopped from contradicting the October 31, 1998 termination date in the estoppel certificate pursuant to Evidence Code section 622 which codifies the doctrine of "estoppel by contract." Section 622 provides, in relevant part: "The facts recited in a written instrument are conclusively presumed to be true as between the parties thereto, or their successors in interest…"
As the Court of Appeal found, "[a]lthough the word ‘instrument’ as used in this section usually refers to a contract, we find the term also applies to estoppel certificates. In viewing an estoppel certificate as a binding confirmation of a lease agreement under section 622, while the departure from a contractual requirement is minimal, the impact on the reliability of commercial real estate transactions is significant."
Estoppel certificates inform lenders and buyers of commercial property of the tenant’s understanding of the lease agreement. Lenders and buyers rely upon the certificates in finalizing loans and purchases, thus, application of section 622 to estoppel certificates promotes certainty and reliability in commercial transactions. A contrary conclusion would defeat the purposes behind the widespread practice of using estoppel certificates.
In this case, where the exact termination date of the lease was unknown, the estoppel certificate served to set forth the key terms of the lease agreement, as understood by the tenant at the time of plaintiff’s purchase of the property. The Court of Appeal indicated that even if the estoppel certificate contained an erroneous recitation of the lease term, the facts contained in the certificate must be conclusively presumed to be true.
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