In the course of obtaining financing, tenants often ask their landlords to sign a landlord waiver. Landlord waivers are intercreditor agreements provided for the benefit of the tenant’s lender or equipment lessor, stipulating certain rights and obligations with respect to the lease and certain property owned or leased by the tenant. Such waivers are often misleadingly simple documents, may be only a page or two long and contain non-technical language, but nevertheless can present unexpected difficulties for a landlord. Too often, landlords fail to recognize all of the consequences of signing a landlord waiver.
Waivers, as their name implies, typically require that a landlord waive its lien rights as to the identified collateral, but the document can also effectively act as an amendment to the lease to the lender’s benefit and the landlord’s detriment. There are certain core issues that often require negotiation, including the timing and length of lender’s access and occupancy rights, insurance and indemnity provisions, the obligation to pay rentals/cure defects, notice and extended cure rights to the lender, the lender’s right to assume and thereafter freely assign the lease upon default, restoration obligations, and the right to conduct public and/or private auctions of the collateral from the demised premises. For example, a waiver typically requires a lender to pay rent only during its "period of occupancy;" a landlord should insist that a lender pay rent for the period which the lender has the right to occupy the leased premises. Attention should also be given to the definition of "collateral," as the ownership of (and/or the ability to dispose of) trade fixtures and other leasehold improvements (even if the landlord paid for the improvements) may be unwittingly transferred by the document.