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A Guide to Landlord Lien Waivers

By Joseph All

Businesses borrow money. Security for the repayment of a loan often includes a lien granted by the borrower to its lender on the borrower's equipment, trade fixtures and inventory (“Tenant's Property”). A lender and its borrower can expend significant time and resources negotiating the loan documents whereby the borrower grants the lender a security interest in Tenant's Property. Of course, businesses also frequently lease the space in which they conduct their operations (“Leased Premises”). If they plan to locate portions of Tenant's Property within a Leased Premises, a conflict of interests inevitably arises between the lender and the owner of the Leased Premises, ie, the borrower's landlord. A lender will want to obtain an unfettered right to enter the Leased Premises and remove the Tenant's Property without being deemed a trespasser or a converter of any interest of the landlord in Tenant's Property.

However, a landlord may have its own lien rights in Tenant's Property. Often the terms of lease agreements will specifically grant to the landlord a lien on the Tenant's Property as additional security for the tenant's performance of its obligations under the lease. Additionally, some states provide protection to landlords in the form of common law and statutory lien rights with respect to portions of Tenant's Property located on a Leased Premises. So long as a landlord is satisfied with a tenant's ability to perform its obligations under its lease (whether by virtue of a security deposit, third-party guaranty or confidence in the tenant's own financial wherewithal), the landlord may be willing to agree to waive or subordinate its security interests in Tenant's Property. Even if that is the case, though, a lender generally also requires that its borrower's landlord grant the lender access to the Leased Premises on its own terms for the removal and disposition of Tenant's Property. The idea of granting such a right of occupancy might not appeal to the landlord; after all, the landlord has already expended its own time and resources in negotiating a lease with the tenant.

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