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Posts from January 2013.
January 29, 2013
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Commercial real estate landlords and the lenders for their tenants have competing interests with respect  to the tenant's personal property located at the demised premises. The landlord is looking to secure the tenant's rental obligations by taking a lien against the tenant's fixtures, inventory, and equipment located in the space, which may be particularly valuable in the case of  retail and restaurant tenants, while the tenant’s lender providing premises fit-out and/or working capital financing desires a security interest in the same property . The landlord’s lien may be created either by contract under the terms of the lease or through operation of law, and allows the landlord  to levy the property located at the demised premises of a  tenant who has failed to pay rent.  While the tenant would rather not allow either party to maintain a lien against its personal property, the tenant's action in this regard is often dictated by the requirements of its lender.  While  national retailers with strong credit typically have the leverage to insist on the  waiver or subordination of  their landlord’s lien rights, most smaller or regional tenants must navigate between their landlord's and lender's competing interests.  Part I will discuss the varied interests of the landlord and the tenant's lender in the tenant’s personal property are discussed in this article, and Part II will discuss suggested compromise solutions and a typical landlord waiver.  Note that the article that is the basis for this post first appeared in the December, 2012 issue of Commercial Leasing Law & Strategy.