Kenneth B. Liffman Chairman of the Board and President, McCarthy, Lebit, Crystal & Liffman Co., LPA. Collateral Access Agreement means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in Borrower’s or its Subsidiaries’ books and records, Equipment, or Inventory, in each case, in form and substance reasonably satisfactory to Agent. The importance of the notice issue is hard to overstate. The program will look at the competing interests of the parties and provide practical suggestions for structuring and negotiating landlord lien waivers and collateral access agreements. For example, for 7(a) loans, the SOP defines a Landlord Waiver as one where the landlord “gives the Lender access to the leased premises and facilitates the liquidation of the collateral on the borrower’s premises[. And, does it mean that the landlord effectively has waived its right to recov… Or, if the lender can’t accept that prohibition, at least provide guidelines for any on-site sale, including that the sale comply with applicable laws and park or business center restrictive covenants. NOTICE: The mailing of this email is not intended to create, and receipt of it does not constitute an attorney-client relationship. However it often falls to the lender to work with the landlord directly. Landlord contact information will be ask for if this is required. Most landlord waiver/subordination documents start out as one-sided bank forms, the landlord with leverage should consider subordinate, retain control of removal of collateral, receive notice of tenant's default and others. In addition, the lender will want to make sure that the expiration or termination of the lease, particularly if it is accelerated because of a default by the tenant, does not deprive it of its opportunity to do so. No further guidance is provided. It was intended to affect a waiver only of a landlord’s State statutory or common law lien rights (lien rights vary considerably from State to State). Subordination would leave the landlord’s lien intact, which may prove important for any number or reasons (e.g., the landlord would retain its ability to force a sale of the collateral, the landlord would be better off being a secured creditor if the tenant files for bankruptcy and the landlord would have a superior position vis a vie other creditors of the tenant). But, what if the Waiver applies to “all present and future property of the tenant”. Landlord Lien Waiver and Collateral Access Agreementby Practical Law Real EstateRelated ContentA Standard Document given by a property landlord to a tenant's lender in which the landlord waives its legal and contractual lien rights to a tenant's non-real estate collateral for nonpayment of rent under a written lease. Lenders often request the right to occupy the leased premises for anywhere from 60 to 90 days but, depending upon the nature of the collateral and whether the disposition will be onsite or offsite, may accept a substantially shorter period. The form of this agreement often has the landlord waiving its lien rights against the collateral and consenting to the lender’s rights to enter the premises and remove the collateral. Under the laws of many states, landlords also have the benefit of a statutory landlord’s lien. Most Landlords are more interested in a successful Tenant at their project than in a first lien position in that Tenant’s personal property and so will agree to subordinate their lien position. Not only is the landlord exposed to the possibility of lender damages, but if the landlord discovers after the lease has terminated or expired that it needs to allow the lender a 60 to 90 day period of time to control the leased premises, the landlord may be unable to deliver the leased premises to a new tenant on the date agreed to in that new tenant’s lease. A collateral access agreement provides the tenant’s lender with the right to access the collateral located on the landlord’s property and assurances that the collateral will be preserved if the tenant defaults on the loan. We have all seen Landlord Waiver Agreements. The duration of such access period is dependent on a number of factors, including the nature of the collateral found in the premises. A more difficult question is when the period of occupancy begins; because this question is usually tied to notification obligations of the landlord. In any event, whenever a landlord reviews a Waiver it should read the Waiver carefully, consider the issues mentioned above and consider also obtaining the assistance of counsel. Does that mean that the Waiver applies to everything that the tenant owns or will own? Tenants, in the course of obtaining financing, often ask their Landlords to sign a Landlord’s Waiver. The landlord should attempt to limit its exposure expressly or by agreeing to use “reasonable efforts” to send notice. A waiver of the landlord's lien rights over its tenant's property located at the leased premises. There are other issues related to the lender’s right of occupancy: The landlord should be certain that the occupancy is not exclusive so the landlord can simultaneously enter the leased premises to prepare the leased premises for the occupancy of the next tenant. To avoid this result, the landlord should request that the lender pay rent for the period during which the lender has the right to occupy the leased premises, rather than for the period of its actual occupancy of the leased premises. A landlord would not want to be faced one day with trying to figure out which assets of the tenant are or are not available to the landlord. Collateral Access Agreements means any landlord waivers, mortgagee waivers, bailee letters and any similar usage, access or acknowledgment agreements of any Person, such as a warehouseman, processor, lienholder or lessor, in possession of any assets of any Borrower or any other Credit Party, in each case in form and substance reasonably satisfactory to the Agent. ©2020 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC. But, what if the Waiver applies to “all present and future property of the tenant”. This could present a significant issue for the landlord especially, as discussed below, if the Waiver applies to liens other than statutory or common law landlord’s liens. A Perfection Certificate completed and executed by each Loan Party. Coronavirus (COVID-19): Navigating the Path Ahead, Data Protection, Privacy and Cybersecurity, Government Enforcement and Investigations, Hospitality, Franchising and Distribution, Disaster Recovery and Government Services. Additionally, the landlord may want to prohibit the lender from selling the collateral at the leased premises. If a lender occupies the leased premises during a period in which the tenant has failed to pay rent, it would seem reasonable for the lender to agree to pay the landlord for that privilege. Does it apply to cash? Structuring Landlord Lien Waivers and Collateral Access Agreements: Navigating Competing Interests of Tenant's Lender and Landlord Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific TUESDAY, AUGUST 15, 2017 Andrea Campbell Davison, Esq., Shareholder, Bean Kinney & Korman, Arlington, Va. John G. Kelly, Shareholder, Bean Kinney & Korman, Arlington, Va. Landlord’s Waivers are intercreditor agreements for the benefit of the tenant’s lender or equipment lessor, stipulating the landlord’s and the lender’s respective rights in certain property owned by the tenant. Landlord Concerns . While the lender may prefer that the landlord waive its lien, it may well accept subordination in lieu of waiver. If the lender did not have a signed landlord waiver, they could not enter the place of business of the borrower to take their collateral. These rights should be sufficient to protect the lender. Simplest of these issues is the period of the lender’s occupancy. These reasonable desires of the lender can present a number of issues for the landlord, particularly in the context of a very lender-friendly Waiver. While it may be able to argue damages against the tenant as a holdover for the months the pledged equipment remains on site , it has no contractual relationship with the secured creditor and thus no right to contractual damages. For instance, the landlord’s version of the Waiver could provide that the lender must pay the landlord rent, beginning, say, five days after the lender has the right to enter the leased premises (to give the lender some rent free period to consider if it wants to incur the expense of preserving its occupancy right) and continuing so long as the lender retains that right. conflict is best resolved through a fair subordination of landlord’s lien agreement. Ideally, the lender’s collateral, which is the subject of the Waiver, would be limited in scope and easily identified. If the collateral is all of the tenant’s assets and the landlord waives all of its lien rights, the landlord could find itself in a position where it is unable even to attach the tenant’s bank accounts after obtaining a judgment. A landlord, however, would rather subordinate its lien to the lender’s lien, as opposed to waiving its lien. Many waivers now, however, extend to any and all liens that the landlord may acquire. A Standard Document given by a property landlord to a tenant's lender in which the landlord waives its legal and contractual lien rights to a tenant's non-real estate collateral for nonpayment of rent under a written lease. If you send this email, you confirm that you have read and understand this notice. iog on the landlord's execution of a waiver of the landlord's lien, or at the very least an agreement to subordinate the landlord's lien to the lender's security interest. The landlord may also resist agreeing to give notice to the lender if the lease is expiring by its terms, as the lender should be capable of making a note as to when the lease is scheduled to expire. The Waiver sets forth a number of specific rights that the lender will have with respect to its collateral. ]” SOP 50 10 5 (J), with technical corrections, page 193. A lender will frequently require its prospective borrower to obtain a Landlord Consent from the landlord of any property occupied by the borrower under a lease, if a material amount of collateral is located there. This Standard Document discusses when to use a lien waiver and collateral access agreement and highlights the rights and waivers granted by this agreement. The lender, however, has agreed to pay rent only during the period in which the lender is actually in occupancy. If the lender is resistant to limiting the liens to be waived or limiting the extent of the collateral, the landlord may want to ask the lender “if I agree with your request, how can I ever collect any money from this tenant until you are paid in full?” If the lender’s answer is “you can’t”, then the landlord might wonder whether it makes sense to execute the Waiver. This would make for a very unhappy landlord and would be particularly unfortunate if the financing related to the Waiver were not used by the tenant to acquire or refinance any of the collateral and/or if the financing caused the tenant to become overleveraged and contributed to the tenant’s lease default. Landlord Lien Waiver and Collateral Access Agreementby Practical Law Real Estate Related Content Maintained • USA (National/Federal)A Standard Document given by a property landlord to a tenant's lender in which the landlord waives its legal and contractual lien rights to a tenant's non-real estate collateral for nonpayment of rent under a written lease. interests, liens and claims which Landlord now has or may hereafter acquire in the Collateral. Landlord’s Obligations Upon Franchisor’s Exercise of the Collateral Assignment: If franchisor exercises its rights under the Collateral Assignment, landlord shall take all action necessary to retake the premises (such action including termination, eviction and legal action). Such Waivers are deceptively simple documents, which may be only a page or two long and contain non-technical language, but nevertheless can present unforeseen problems for the landlord. Regardless of the situation, a Landlord's Waiver can help limit liability for all involved parties. As of the Second Restatement Closing Date, the Credit Parties shall use commercially reasonable efforts to deliver to the Agent a Collateral Access Agreement with respect to the chief executive office (if leased) and each of the other locations set forth on Schedule 3.4 of the Security Agreement where Credit Parties maintain books and records or Inventory and Equipment with a fair market value in excess of $300,000. The landlord may want to stipulate that the lender can only enter the leased premises while a representative of the landlord is present or only during business hours. Whether you're a lender, tenant or landlord, you can use a Landlord's Waiver to enable a lender to legally enter rented property to access collateral. Landlord lien rights typically allow a landlord to obtain a lien or springing lien on the tenant’s property in the leased premises to assist in the collection of delinquent rent. However, it would be prudent for a landlord to impose certain rules and limitations on lender access. What Commercial Landlords Need To Know About Landlord Lien Waivers Or Landlord Subordination Agreements. Therefore, most Waivers require the landlord to notify the lender prior to terminating the lease. Landlords can use it to waive their own rights to a tenant's property. Often, the lender would have provided financing for the tenant to purchase inventory or certain equipment and would require that its purchase money security interest in those items be superior to any statutory or common law lien available to the landlord. Anything that you send to anyone at our Firm will not be confidential or privileged unless we have agreed to represent you. Until recently, the scope of the typical Waiver was narrow. Access rights to the leased premises for the lender to remove or auction off (whether through public or private sale) the collateral if necessary. For example, a lender’s right of access should be time limited. be sure its lien on the collateral is superior to any lien of the landlord, and; have the right to enter the premises to remove the collateral in case the tenant defaults on its loan. The lender, however, is concerned about the possibility that the tenant will default under its lease before it is in default under its loan. These broader Waivers, in particular, present the landlord with the following potential pitfalls, among others. Landlord's lien waivers deal with more than just the pure statement that a landlord waives its lien rights to, (or subordinates its lien rights against) the rights of a lender or equipment lessor. Ideally, the lender’s collateral, which is the subject of the Waiver, would be limited in scope and easily identified. The landlord’s lease agreement is with the tenant, not the secured creditor. The landlord waiver allows the lender to enter the property and obtain the collateral in the event of a default. Does it apply to cash? In this webinar, you’ll learn how to negotiate a landlord lien waiver and collateral access agreement. Landlord notification obligations present several issues for the landlord, the most obvious of which is: What happens if the landlord forgets or otherwise fails to notify the lender - does the landlord incur liability for failure to send a timely notice? They essentially state that the landlord releases and subordinates any landlord lien or claim to the FF&E that is secured to the tenant’s lender. one of the key features of a landlord waiver agreement. These are core issues that the landlord may need to negotiate with the lender. This CLE webinar will discuss the perspectives of both the tenant's lender and the landlord with respect to the tenant's collateralized property on the landlord's premises. All contents of the lawinsider.com excluding publicly sourced documents are Copyright © 2013-. Tenants might use it to let lenders access to personal property. When drafting your commercial property lease, you (or your attorney) may have had the astute notion to include a provision which … Structuring Landlord Lien Waivers and Collateral Access Agreements: Navigating Competing Interests of Tenant's Lender and Landlord Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNESDAY, JUNE 8, 2016 Andrea Campbell Davison, Esq., Bean Kinney & Korman, Arlington, Va. John G. Kelly, Shareholder, Bean Kinney & Korman, Arlington, Va. … If the landlord waives all liens, the landlord may be unable to obtain a lien on the specified property of the tenant even if the landlord took the time to go to court and obtain a judgment against the tenant and levy that judgment on property of the tenant. Lenders generally request 60-90 days to enter and remove the collateral but, in some cases, landlords want the property removed in as little as five days. Since commercial leases rarely obligate a landlord to execute a landlord consent and waiver, lenders typically enlist the tenant's help in securing the agreement. The lender also argued that even if the landlord had a lien it was subject to the lender’s security interest pursuant to a landlord waiver and subordination agreement. While this is helpful, it may not adequately compensate the landlord. If the tenant defaults under its loan before it defaults under its lease, the lender can elect whether and when to enter the leased premises and deal with the collateral. Some Waivers go further and require the landlord to notify the lender at the same time the landlord gives notice of default to the tenant or, in an extreme case, notice may be required whenever the tenant is not in compliance with any of the terms of the lease (irrespective of any notice and cure period and of whether the landlord was aware of the default). These Waivers are often not limited to identifiable items or classes of the tenant’s property, but rather attach to “all present and future property of the tenant”. In some instances those liens could be superior to a lien created by a security interest in favor of the tenant’s lender. (i)Subject to the terms of Section 10.18(a), in the case of any leased real property, a Collateral Access Agreement from the landlord of such property waiving any landlord's Lien in respect of personal property kept at the premises subject to such lease. Landlord’s lien waivers deal with more than just the pure statement that a landlord waives its lien rights to, (or subordinates its lien rights against), the rights of a lender or of an equipment lessor. A landlord would not want to be faced one day with trying to figure out which assets of the tenant are or are not available to the landlord. Despite the express language, you may later be approached by your tenant to sign a landlord lien waiver or subordination agreement (“Lien Waiver/Subordination”) whereby you waive or subordinate your lien on the tenant’s personal property. However, sometimes landlords agree to subordinate their lien rights rather than waive them. While the lender’s loan documents may provide that a lease default constitutes a default under the loan, that isn’t much help to the lender if it does not know about the lease default. The lender will want a period of time during which it can enter upon the leased premises and either sell its collateral on site or remove the collateral for sale elsewhere. (g)Collateral Access Agreements. Moreover, Waivers are often sought in a variety of circumstances, including highly leveraged financings where the lender’s collateral has not been acquired with proceeds of the loan. And, does it mean that the landlord effectively has waived its right to recover anything from the tenant? As noted above, Waivers were generally confined to specific statutory or common law landlord lien rights and not to, for example, judgment liens. Waivers in use today, however, are often not confined to purchase money security interests in inventory or specific equipment. One situation the landlord does not want to encounter is the possibility that some of the lender’s collateral remains in the leased premises after the tenant vacates and the landlord is uncertain of how it may dispose of that collateral to make way for a new tenant. There are nuances involved in negotiating this issue with the lender, but typically the landlord and the lender can agree upon mutually acceptable language. Waivers, as their name implies, typically require that a landlord waive its lien rights as to the identified collateral. Another frequently negotiated section of any landlord subordination agreement is lender’s right to access and occupy the premises in order to inspect and/or remove collateral. This “intercreditor” agreement is often called a Landlord Consent, a Landlord Waiver, or a Collateral Access Agreement. For this reason, the landlord will want the Waiver to provide that any collateral remaining after the end of the lender’s occupancy period will be deemed abandoned as far as the lender is concerned and the landlord may dispose of that collateral without any liability to the lender. Does that mean that the Waiver applies to everything that the tenant owns or will own? A collateral access agreement gives the tenant`s lender the right to access the security on the landlord`s property and ensures that guarantees will be retained if the tenant is late in the loan. Those mentioned above are common to most Waivers. Landlord already has a lien as Collateral for a loan. In such a case, if the landlord gives the lender notice and 57 days later the lender enters the leased premises for three days, the lender is required to pay only three days rent, but the landlord has effectively lost the use of its leased premises for 60 days. 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