Commercial loan structures frequently call for either landlord lien waivers or tenant subordination agreements. In a situation where the collateral is real property that is already subject to a leasehold interest, the proper document will be a tenant subordination agreement. This document will contractually alter the priority of the interests in the collateral real property. That is, the existing leasehold interest will be subordinated to the newly acquired mortgage interest. The typical tenant subordination form will also include attornment language by which the landlord agrees to leave the tenant in place under its lease in situations where the landlord might otherwise lawfully be able to remove the tenant (e.g. a foreclosure suit following loan default) and the tenant agrees to acknowledge the lender as new landlord under the lease agreement. Without this agreement, it may very well be the case that the lease interest cannot be foreclosed in the event of a mortgage foreclosure.
A loan to a borrower that leases its business premises calls for a landlord lien waiver document. Florida Statute Section 83.08 creates a statutory lien for unpaid rent in favor of a landlord. The lien attaches to a variety of property including “… property of the lessee or his or her sublessee or assigns, usually kept on the premises.” Finally, that lien is given a priority above that of a subsequent lien such as a mortgage lien. In order to insure that the bank’s mortgage lien will take priority, the landlord must agree to waive its statutory lien or, at a minimum, subordinate it to the mortgage lien.
