Landlord Waiver Document Considerations

Real Estate Influence
October 12, 2012 — 881 views  
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Landlord Waiver Document Considerations

When a company leases or rents space and then wants to borrow money for any reason, they will go to a bank or commercial lender and apply for a loan. A well thought out commercial or business loan agreement, which is backed by collateral, will almost always require a landlord waiver document before the loan is approved. The document makes it much easier for the lender to enter and occupy the premises and liquidate any or all of the personal property of the tenant should that tenant/borrower default on the loan. 

Landlord Waiver Document

The document, which is presented to the landlord, by the tenant, to be duly executed, specifies the circumstances under which the lender can gain access to the landlord's building. 

Timing

It is always much wiser to get the tenant and landlord to sign a landlord waiver before a loan is executed. Waiting until the tenant defaults on the loan to try to get the landlord to grant access to the premises can make the liquidation process much more complicated and costly. Usually, if a business cannot make their monthly payments on a business loan, they are also behind on their rent. 

At that point the tenant may be long gone or not very cooperative with the lender in helping them get the waiver they need. The landlord is probably angry about being stiffed on the rent and having to find a new tenant. He or she may demand that the bank or lender pay the back rent before they will consider granting access. Even then, the terms for access may be much more costly than if an agreement had been executed prior to the tenant defaulting.

Bankruptcy is a Possibility

Having a landlord waiver can allow a secured lender to recover some or most of the remaining balance on the loan before the former tenant and debtor may decide to file for bankruptcy. Once bankruptcy has been filed, the lender is precluded from selling off the assets of the debtor. A bankruptcy court will administer the sale and distribution of any money recovered to the creditors. 

While the lender, who has a valid claim as a secured creditor, will receive priority when the judge decides the settlement terms for all creditors, the process can be tied up in court for several years.

A Landlord Waiver Benefits Both the Lender and the Landlord

An orderly sale of the defaulting party's assets benefits the lender by reducing the costs of trying to recover the money they are still owed. It benefits the landlord by quickly clearing out the space and making it available for a new tenant. Whether it takes a day or a month to liquidate the assets, the landlord is compensated by the lender for each day that the store, office or other leased space is occupied. 

 

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