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Landlord Considerations in a Landlord Waiver


Landlords leasing space to a retail, restaurant or other like tenant are often requested to execute a document for the benefit of a tenant’s lender providing financing for furniture, fixtures and equipment as well as leasehold improvements. This article will highlight items which a landlord should consider when asked to execute such a document.

The scope of the waiver requested of the landlord should be carefully reviewed. We have seen many landlord waiver documents drafted by lending institutions which state that the landlord is not merely subordinating any claim or interest in the assets of its tenant but is waiving and relinquishing any and all liens and claims it may have in all of the assets of the tenant. The purpose of the landlord waiver provision is to enable the lender financing the furniture, fixtures and improvements to have a first lien on such items and thereby enable the lender to repossess such personal property collateral and sell the same at a secured party sale. The landlord, as a result, should only be required to subordinate any claim it has in such items and should not, in any event, release any and all claims it may have against not only those specific assets of the tenant or certainly as to all of the tenant’s assets. It is imperative that the landlord not inadvertently convert its lease into a non-recourse lease against its tenant by relinquishing any claims it may have against all of the assets of the tenant.

The next major area for discussion is the provision which attempts to preserve the lender’s right of access to the personal property collateral located in the leased premises. The intent of this provision is to give the lender the opportunity to assemble its personal property collateral and sell the same at a secured party sale in the event the tenant defaults under the lender’s loan. It is likely that the tenant will default under its lease at the same time it defaults under any such loan. As a result, the landlord needs to preserve its ability to default the tenant and ultimately terminate the lease and evict the tenant and thereby regain possession of the leased premises. We have seen landlord waiver documents which are broadly drafted in such a fashion as to effectively prohibit the landlord from terminating the lease of its tenant and regain possession of the space while giving the lender an open-ended access right to repossess its collateral. A well drafted provision from the landlord’s point of view will specify a time period subsequent to the termination of the lease by the landlord to afford the lender a right of access to its collateral. The lender should pay base rent and additional rent on a daily basis for each day that the lender wants such right of access to be applicable. A customary cut-off is thirty days.

In addition to the above major considerations, a landlord waiver document should also obligate the lender to repair any damage caused by the removal of its collateral, and items which are not removable under the lease must be excluded (such as built in equipment).

A well drafted landlord waiver document can accommodate the reasonable interests of the lender without putting the landlord in a problematic position.