Don’t Bet the Lease: Smart Strategies for Handling Landlord Waiver Requests
Published: June 25, 2026
About every six months or so, I get the itch to gamble – in a jurisdiction that allows it, of course. Despite decades of [expensive] practice, I’m not very good at it. It seems to me that the best gamblers are somehow able to perceive trends and bet big when they feel the rights cards are about to hit. I instead stick to the “book” and play the odds that are stacked against me from the start. It’s a terrible habit.
The ability to perceive and react to trends is valuable across all industries, and commercial real estate is no exception. One recent trend we’ve seen more frequently lately is the request that a landlord sign a landlord waiver agreement in favor of a tenant’s lender. Our landlord clients often come to us asking what the document means and whether they have to sign it before even considering the terms proposed.
The background is this: tenant wants to obtain a loan for working capital. Tenant’s lender requires that the loan be secured by a first priority lien against tenant’s assets, including tenant’s furniture, fixtures, equipment and other personal property in the leased premises (“FF&E”). To ensure the priority of its lien in connection with the loan, the lender requires the tenant to request that the landlord subordinate or waive any security interest that the landlord may have in the FF&E by virtue of the lease. These forms also require the landlord to provide notice of any tenant defaults, permit the lender the right to enter onto tenant’s premises to repossess the collateral, and install certain other enforcement rights.
The landlord is almost never legally required to sign the proposed waiver. Practically speaking, though, the landlord will need to cooperate with the tenant and their lender regarding these requests to ensure the tenant can obtain the financing they need to run their business (and pay rent!). The landlord is therefore often forced to cooperate with a lender it did not choose for a loan it did not request, all to its detriment.
When negotiating a proposed landlord waiver, a landlord should try to stick to the following priorities and positions:
- Landlord should subordinate – not waive – its rights to the collateral. The subordination should be clear and limited; it should only apply to lender’s specific loan, to specific collateral, and generally only to purchase money debt. It should not be a blanket waiver against all liens, or any third-party liens for that matter. It should also not apply to judgment liens or other liens subsequently obtained by the landlord against the tenant.
- The lender’s right to enforce its lien on the collateral should run concurrently with the tenant’s right to cure its defaults. At most, the landlord should give a short additional period for the lender to cure the tenant default and/or enforce its rights in the collateral. The rights given to lender should not undermine the protections of the lease.
- The lender should be required to pay rent for the period of time during which it can repossess the collateral as a condition to enforcement and otherwise comply with the lease.
- The lender should indemnify the landlord for any damages resulting from entry onto the property.
- The lender should only be permitted to inventory and remove collateral. No auctions, repairs or other activities should be permitted.
- Landlord can try to provide notices of default to the lender, but they should not be required. A landlord is unlikely to remember this for every tenant.
- Lender should provide notice before entry onto the property.
Note, by default under CA law, a landlord does not automatically have a lien against tenant’s personal property. This can only be done through an express grant from the tenant. Moreover, even if tenant grants such security interest, it is only perfected if landlord files a UCC-1 financing statement. The effort by a lender to obtain a waiver is often much-ado-about-nothing, as the landlord has no security interest to begin with.
To be clear, a landlord that agrees to a landlord waiver/subordination is giving up rights voluntarily. If the tenant’s business were to fail, its various creditors, including the lender and landlord, would get in line to recover against the tenant’s assets. Having signed a landlord waiver/subordination, the landlord has agreed that for purposes of collecting against the FF&E, the lender gets to stand in front of the landlord in that line.
Ultimately, this is an underwriting issue. In signing a landlord waiver, most landlords decide that the value of the FF&E of the tenant, often consisting of basic equipment and personal items, is unlikely to justify extensive collection efforts or provide sufficient value to repay the landlord following an event of default by the tenant. The only situation where we’ve seen landlords successfully (and reasonably) oppose these requests is where the tenant is engaged in a business where their personal property is tangible, marketable, and highly valuable – think high priced inventory storage or specialized equipment. In that case, where the landlord could reasonably be expected to pursue such personal property in an enforcement proceeding, the landlord may not be willing to agree to subordinate or waive their rights in tenant’s personal property. Otherwise, the chance of recovery against a tenant’s equipment and other personal effects is so low that a landlord may reasonably conclude it is not worth fighting with a secured lender over granting the landlord waiver.