How to Fight Subordination of a Leasehold

Landlords are regularly asked to consent to a tenant's financing, secured by the tenant's equipment and other assets. Such consent proposals are typically accompanied by a further request for the landlord to waive or subordinate its interest in the tenant's personal property, if any, in favor of the claim and lien of the tenant's lender. Today, lenders often go so far as to seek the subordination of the landlord's interest in the lease itself to the interest of the lender under the financing. In response, landlords will routinely resist any subordination of the leasehold, and will require various protections such as excluding fixtures from the lender's collateral and providing that if the lender forecloses on, or takes possession of, the collateral, it will do so peaceably and in compliance with applicable legal process, without interference with the operations of the landlord's shopping center or the businesses of other tenants, and with an obligation by the lender to repair any damage to the premises resulting from the removal of the collateral.

19 minute read August 18, 2003 at 06:34 PM

By

John H. Lewis