The Landlord Lien Subordination And Collateral Access Agreement

The Landlord Lien Subordination And Collateral Access Agreement is required to be executed during the loan closing process when an applicant receiving an SBA loan has secured an interest in real property through a commercial lease.

Parties To Agreement

Parties to the agreement include the SBA Lender, who is referred to as the Lender, the SBA loan applicant, who is referred to as the Tenant and the Landlord who owns the premises occupied by the Tenant, who is referred to as the Landlord.

The purpose of this agreement is to solicit and confirm the Landlord’s willingness to facilitate the loan by agreeing to subordinate its interest, if any, in the collateral, and permit Lender access to the collateral located at the premises in the event of Tenant default subject to the following terms and conditions.

Agreement Conditions

• The Landlord agrees to subordinate all collateral securing the Lenders loan which is not permanently affixed to the premises including but not limited to personal property, inventory, chattel paper, and general intangibles, goods, trade fixtures, machinery and equipment
• The Landlord is entitled to reasonable notice by the Lender of the Lenders intent to enter the premises during normal business hours to inspect and remove any or all collateral
• The Landlord agrees to not unreasonably interfere with the Lender to exercise its rights to dispose of collateral either by removal or sale
• The Landlord is entitled to be compensated by the Lender for entry to the premises if the Lender requires additional time to dispose of the collateral beyond the Disposition Period defined as 30 days after Lender receives written notice from the Landlord of Termination of subject lease or the Lender provides notice to the Landlord of the Tenants default
• The Landlord is entitled to the Lender disposing of the Collateral in a manner that does not interfere with the Landlord’s other tenants
• The landlord shall not be liable in any way for any injury, loss or damage occurring as a result of entry to the premises and disposition of the Collateral by the Lender
• The Landlord is entitled to prompt repairs of any damage to the premises during the disposition of the Collateral by the Lender
• The Landlord is entitled to review Lenders proof of liability and workers compensation insurance prior to permitting entry onto the premises by the Lender
• The Landlord is entitled to the Lender’s cooperation to enter the premises during the Disposition Period for the purpose of marketing the premises for lease, repairs and improvements to the premises or any other reasonable purpose.

Best Practices

Keep in mind, Landlords are not quick to surrender rights to their premises and depending on the relationship with the Landlord and the size and scope of the Landlords commercial enterprise, this agreement may be forwarded by the Landlord to their Attorney for review.

In turn, the Landlord’s Attorney may make additions to or redline the agreement in favor of the landlord. In this case, execution of the agreement will take considerable time and effort during negotiations.

Therefore, as a best practice to avoid the delay of escrow closing, The Tenant is recommended to provide a copy of this agreement to their Landlord as soon as possible after loan approval. This will give the Landlord ample time to review and execute the Agreement to their satisfaction.