Common real estate queries: Landlord waivers

I'm Mark Giavedoni, a commercial real estate and lending lawyer at Gowling WLG. This video is part of our real estate topics for lenders series. In this video, we will be discussing landlord waivers.

Landlord waivers are usually sought when a lender is advancing funds to a tenant for the operation of a business at a leased premises, or to acquire inventory or equipment that will be located at the leased premises. At law, and under most commercial leases, landlords have a right to distrain against tenant property on the premises if the tenant is in default of the lease. This means the landlord can seize the tenant's equipment, inventory, or accounts and sell them to realize on arrears owed to the landlord. Naturally, this is in competition with a tenant's lender who wants access to the same equipment, inventory or accounts, if the tenant borrower is in default under the loan.

A landlord's waiver will identify which assets of the tenant the landlord will waive a right to distrain against if the tenant is in default of the lease, leaving the tenant's lender specifically access to seize those goods. Usually, a landlord's waiver will allow the tenants lender access to the property, even if the tenant is prevented from access by being locked out by the landlord to identify and remove certain chattels, goods and assets of the tenant, and to have a priority claim to enforce against that personal property. This is different than a subordination of interest under the PPSA, mainly because the landlord often doesn't have a security interest in the goods, only possession of them. But that's the subject of another video presentation.

Most landlords are not comfortable giving these, especially to a new tenant's lender. Lenders should try to request these in the context of commercially reasonable needs to advance funds to the tenant borrower for the normal and customary operation of a functioning business. Or specifically, if the lender is advancing funds to acquire particular equipment, it follows that the lender should have a priority claim to that equipment. Often, landlord waivers are heavily negotiated.

This presentation was a high-level overview. However, if you find that you have more specific questions about any of the points discussed, or their application to a specific fact situation, please reach out to any member of our lending team. And I'm also available through email at mark.giavedoni@gowlingwlg.com. Thank you.