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The Landlord's Lien under the Uniform Commercial Code

By David P. Resnick and Erin Brechtelsbauer

A property owner may consider a variety of legal and business protections when negotiating a lease with a tenant that is only marginally creditworthy. While used less frequently than security deposits and personal guarantees, granting the landlord a security interest in its personal property can enhance a tenant's credit. This device may be more effective when conferred by certain types of tenants than by others (e.g., a restaurant or industrial tenant with valuable fixtures and/or inventory, as opposed to a conventional office tenant), but nevertheless, it may provide the landlord with a potent default remedy, particularly in a fragile market.

Many states have enacted statutes that prescribe a landlord's lien, and these liens can vary in scope and strength. Other states grant to a landlord the common-law right of distraint, which may enable a landlord to take possession of personal property located within the premises following a default by the tenant. A third, more universal option for landlords is a consensual security interest granted by the tenant under the lease pursuant to Article 9 of the Uniform Commercial Code (UCC).

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