Collateral Assignment Of Lease
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What is a Collateral Assignment Of Lease?
A collateral assignment of lease is a legal contract that transfers the rights to rental payments from the asset's owner to a lender to secure funding. In this contract, the lease’s rentals are like a loan from the funder to the lessor and the lease acts as security. Collateral assignment of lease agreements are often used in commercial real estate. In addition to the actual contract, the agreement is often accompanied by a promissory note and a security agreement. Throughout the duration of a collateral assignment of lease agreement, the lessor retains ownership of the leased asset.
Common Sections in Collateral Assignment Of Leases
Below is a list of common sections included in Collateral Assignment Of Leases. These sections are linked to the below sample agreement for you to explore.
Collateral Assignment Of Lease Sample
Reference : Security Exchange Commission - Edgar Database, EX-10.4 5 dex104.htm COLLATERAL ASSIGNMENT OF LEASES AND RENTS FOR THE LA CIENEGA-LA PROPERTY , Viewed November 9, 2021, View Source on SEC .
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COLLATERAL ASSIGNMENT OF TENANT’S INTEREST IN LEASE Sample Clauses
Get the official word add-in, related clauses.
- Assignment of Lease
- Subordination to Mortgages; Estoppel Certificate
- Assignment of Leases
- Assignment of Leases and Rents
- Conveyance by Lessor
- Payment of Leasehold Obligations
- Assignment of Sublease
- Assignment of Rents and Leases
- Assignment of Leases, Rents and Profits
- Lease Assignment
Related to COLLATERAL ASSIGNMENT OF TENANT’S INTEREST IN LEASE
Assignment of Lease If the Trustee or Tenant has assumed the Lease pursuant to the provisions of this Section for the purpose of assigning Tenant's interest hereunder to any other person or entity, such interest may be assigned only after the Trustee, Tenant or the proposed assignee have complied with all of the terms, covenants and conditions of this Lease, including, without limitation, those with respect to Additional Rent. Landlord and Tenant acknowledge that such terms, covenants and conditions are commercially reasonable in the context of a bankruptcy proceeding of Tenant. Any person or entity to which this Lease is assigned pursuant to the provisions of the Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment. Any such assignee shall upon request execute and deliver to Landlord an instrument confirming such assignment.
Subordination to Mortgages; Estoppel Certificate Tenant accepts this Lease subject and subordinate to any mortgage(s), deed(s) of trust, ground lease(s) or other lien(s) now or subsequently arising upon the Premises, the Building or the Property, and to renewals, modifications, refinancings and extensions thereof (collectively referred to as a “Mortgage”). The party having the benefit of a Mortgage shall be referred to as a “Mortgagee”. This clause shall be self-operative, but upon request from a Mortgagee, Tenant shall execute a commercially reasonable subordination agreement in favor of the Mortgagee. As an alternative, a Mortgagee shall have the right at any time to subordinate its Mortgage to this Lease. Upon request, Tenant, without charge, shall attorn to any successor to Landlord’s interest in this Lease. Landlord and Tenant shall each, within 10 days after receipt of a written request from the other, execute and deliver a commercially reasonable estoppel certificate to those parties as are reasonably requested by the other (including a Mortgagee or prospective purchaser). Without limitation, such estoppel certificate may include a certification as to the status of this Lease, the existence of any defaults and the amount of Rent that is due and payable.
Assignment of Leases The Assignment of Leases creates a valid assignment of, or a valid security interest in, certain rights under the Leases, subject only to a license granted to Borrower to exercise certain rights and to perform certain obligations of the lessor under the Leases, including the right to operate the Property. No Person other than Lender has any interest in or assignment of the Leases or any portion of the Rents due and payable or to become due and payable thereunder.
Assignment of Leases and Rents There exists as part of the related Mortgage File an Assignment of Leases (either as a separate instrument or incorporated into the related Mortgage). Subject to the Permitted Encumbrances and Title Exceptions (and, in the case of a Mortgage Loan that is part of a Whole Loan, subject to the related Assignment of Leases constituting security for the entire Whole Loan), each related Assignment of Leases creates a valid first-priority collateral assignment of, or a valid first-priority lien or security interest in, rents and certain rights under the related lease or leases, subject only to a license granted to the related Mortgagor to exercise certain rights and to perform certain obligations of the lessor under such lease or leases, including the right to operate the related leased property, except as the enforcement thereof may be limited by the Standard Qualifications. The related Mortgage or related Assignment of Leases, subject to applicable law and the Standard Qualifications, provides that, upon an event of default under the Mortgage Loan, a receiver may be appointed for the collection of rents or for the related Mortgagee to enter into possession to collect the rents or for rents to be paid directly to the Mortgagee.
Conveyance by Lessor Lessor may assign this Lease to any purchaser of the Leased Property. If Lessor or any successor owner of the Leased Property conveys the Leased Property in accordance with the terms hereof other than as security for a debt, and the grantee or transferee of the Leased Property expressly assumes all obligations of Lessor hereunder arising or accruing from and after the date of such conveyance or transfer, Lessor or such successor owner, as the case may be, shall thereupon be released from all future liabilities and obligations of Lessor under this Lease arising or accruing from and after the date of such conveyance or other transfer as to the Leased Property and all such future liabilities and obligations shall thereupon be binding upon the new owner.
Payment of Leasehold Obligations Each Borrower shall at all times pay, when and as due, its rental obligations under all leases under which it is a tenant, and shall otherwise comply, in all material respects, with all other terms of such leases and keep them in full force and effect and, at Agent’s request will provide evidence of having done so.
Assignment of Sublease Any approved sublease will be assigned to LESSOR as security. LESSEE will deliver the original counterpart of the sublease to LESSOR and make any filings necessary to protect LESSOR's security interest.
Assignment of Rents and Leases The Borrower hereby assigns to the Lender all right, title, and interest of the Borrower in the Rent and Leases to have and to hold absolutely until all monies secured by this Mortgage and all obligations of the Borrower in this Mortgage have been fully paid and satisfied. The Borrower hereby grants to the Lender full power and authority to enter upon the Lands to collect the Rents, to demand, collect, xxx for, distrain for, recover, receive and give receipts for the Rents, to enforce payment of the Rents and performance of the obligations of any guarantees of payment and covenants to pay, and to exercise all rights in respect of any or all Leases in the Lender’s own name or in the name of and as agent for the Borrower, as the Lender may elect, and hereby grants to the Lender irrevocable authority to join the Borrower in any such proceedings or actions. Notwithstanding that this is a present and absolute assignment, (subject to redemption on repayment of all monies secured by this Mortgage), the Borrower, as agent for the Lender, shall be entitled to collect and retain the Rents as and when they become due and payable according to the terms of the Lease and to deal with all Leases until the Lender gives notice to tenants directing that they pay the Rents to the Lender. The Borrower covenants that it now has good and sufficient power, authority and right to assign the Rents and Leases and other benefits to the Lender as herein provided and shall not further assign, pledge or otherwise encumber the Rents or Leases, accept any prepayment of the Rents, nor do or omit to do any act having the effect of waiving, releasing, reducing or abating any rights or remedies of the Borrower or any obligations of any other party in connection with the Leases. Nothing herein contained or any action taken by the Lender as provided will make the Lender a mortgagee in possession, or will have the effect of making the Lender responsible for the collection of the Rents or for the observance or performance or enforcement thereof or of any of the provisions of the Leases either by the Borrower or by any other person, liable to account for any monies except such monies as it actually receives pursuant to this assignment of Rents less proper collection charges, inspection fees, costs (including, without limitation, legal fees and disbursements on full a indemnification basis and in no event less than on a solicitor and client basis) and other expenses expended by the Lender and such monies when so received shall, at the discretion of the Lender, be applied on account of the monies secured by this Mortgage. The giving of this assignment of Rents and Leases is by way of additional and collateral security for all monies secured by this Mortgage and not in substitution for any other security and will not in any way diminish, novate or otherwise affect any other security and such other security will not diminish, novate or otherwise affect this assignment of Rents and Leases. Any right or remedy under this assignment of Rents and Leases may be taken either independently or in conjunction with any other rights or remedies of the Lender under this Mortgage. The Borrower shall execute and deliver such further assurances, assignments, notices or other documents and do all such other things as the Lender may reasonably require from time to time to perfect this assignment of Rents and Leases.
Assignment of Leases, Rents and Profits There exists as part of the related Mortgage File an Assignment of Leases, Rents and Profits (either as a separate instrument or incorporated into the related Mortgage). Subject to the Permitted Encumbrances and the Title Exceptions (and, in the case of a Mortgage Loan that is part of a Whole Loan, subject to the related Assignment of Leases, Rents and Profits constituting security for the entire Whole Loan), each related Assignment of Leases, Rents and Profits creates a valid first-priority collateral assignment of, or a valid first-priority lien or security interest in, rents and certain rights under the related lease or leases, subject only to a license granted to the related Borrower to exercise certain rights and to perform certain obligations of the lessor under such lease or leases, including the right to operate the related leased property, except as the enforcement thereof may be limited by the Standard Qualifications. The related Mortgage or related Assignment of Leases, Rents and Profits, subject to applicable law, provides that, upon an event of default under the Mortgage Loan, a receiver is permitted to be appointed for the collection of rents or for the related mortgagee to enter into possession to collect the rents or for rents to be paid directly to the mortgagee.
Lease Assignment Borrower acknowledges that, concurrently herewith Borrower is delivering to Lender, as additional security for the repayment of the Loan, an Assignment of Leases and Rents (the "ASSIGNMENT") pursuant to which Borrower has assigned to Lender all of Borrower's right, title and interest in the Leases and the Rents and income from the Property. All of the provisions of the Assignment are hereby incorporated herein as if fully set forth at length in the text of this Mortgage. Borrower agrees to abide by all of the provisions of the Assignment.
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Real Estate Blog
5 elements to include in collateral assignment of lease/landlord’s waiver.
06/20/2012 | by Gary D. Buchman
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Landlords of commercial properties are often asked to sign a collateral assignment of lease and a waiver of the landlord’s lien on a tenant’s trade fixtures and equipment in favor of the tenant’s equipment lender or franchisor. The usual form presented permits the lender/franchisor to enter the leased premises in the event of a tenant default under its equipment loan or franchise agreement, in order to repossess equipment and trade fixtures. This may occur notwithstanding that such a default of tenant’s loan arrangements is not a default under the lease. When coupled with a collateral assignment of lease, the lender/franchisor will have a right to occupy the premises and to subsequently assign tenant’s leasehold to a new tenant/franchisee.
From a landlord’s perspective, there are several key elements to incorporate into these documents:
- The obligation of the lender/franchisor to remove the equipment and trade fixtures at, or promptly after, expiration of the lease;
- The obligation of the lender/franchisor to pay rent and other charges during its possession of the premises;
- The obligation of the lender/franchisor to restore any damage to the premises resulting from removal of equipment and trade fixtures;
- The right of the landlord to approve any future tenant that lender/franchisor may wish to take the place of the existing tenant; and
- The continuing obligation of the existing tenant, notwithstanding the collateral assignment of the lease and any subsequent repossession or assignment of the lease by the lender/franchisor.
Gary D. Buchman – Partner
Gary D. Buchman is a partner in the firm’s Real Estate Department.
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News & events, when a tenant’s lender wants a waiver.
Key ingredients for many businesses are a lease and some sort of financing. That financing may be in the form of a loan secured by the tenant’s personal property, or it may be in the form of an equipment lease. (The issues discussed below apply equally to both loans and equipment leases, so for simplicity, we will refer only to lenders, loans and collateral.)
In connection with the financing, because the collateral may be located within the tenant’s leased premises, the lender will often want to enter into an agreement with the landlord. The goal of this agreement, from the lender’s perspective, is to:
- be sure its lien on the collateral is superior to any lien of the landlord, and
- have the right to enter the premises to remove the collateral in case the tenant defaults on its loan.
The form of this agreement often has the landlord waiving its lien rights against the collateral and consenting to the lender’s rights to enter the premises and remove the collateral. The tension, from the landlord’s perspective, is that if the tenant has defaulted under its loan (creating the need for the lender to enter the premises), then the tenant may also have defaulted on the landlord’s lease.
There is no statutory landlord’s lien in Colorado, nor is there a concept of distraint or distress. Therefore, this article relates only to consensual liens (obtained pursuant to the Uniform Commercial Code) or judgment liens (obtained after a successful lawsuit). Other states have landlord’s liens or similar rights in favor of landlords, and additional consideration may need to be given to these agreements in those states.
When presented with this type of agreement, here are some considerations for landlords:
- Subordinate, Don’t Waive: Many lenders ask the landlord to completely waive any right to a lien on the collateral. If possible, landlords should try to subordinate their lien rights rather than completely waive them.
- Notice of Default: It may be difficult for landlords to track an obligation to notify a third party, so try to limit the landlord’s obligation to give notices of default to the lender. If the landlord has to give notice, it is worth including the lender’s contact information in the notice provisions of the lease itself.
- If serial numbers or some other specific list is available, it should be used.
- Leasehold improvements that have been permanently installed in the premises. The lease may already provide that these are the landlord’s property upon installation, so it would be helpful to clarify that in the subordination.
- The tenant’s interest in the lease itself. (See below on collateral assignments of the lease.)
- The landlord should try to limit the time that the lender can be in the space, such as 30 or 60 days after the tenant’s default.
- Carrying liability insurance;
- Indemnifying the landlord for injuries or damage occurring during the removal process; and
- Paying rent. On this point, also consider whether the lender has to cure any then-existing tenant default, especially for unpaid rent.
- Try to limit the landlord’s exposure for damage to the collateral in connection with its removal from the premises.
- Avoid Auctions: While a private sale in the premises may be acceptable, try to not permit auctions or other public sales.
- Tenant and Guarantors Sign: The tenant and any guarantors should execute the agreement, as well. This will bind the tenant to any obligations in the agreement. Having the guarantors sign will limit the guarantors’ ability to argue that their obligations were negatively affected by the agreement and any concessions the landlord may have made.
Property Deemed Abandoned: If the lender does not remove the collateral within a stated time, it should be deemed abandoned, permitting the landlord to remove it to make way for a replacement tenant.
There is no statutory landlord’s lien in Colorado, nor is there a concept of distraint or distress. Therefore, this article relates only to consensual liens (obtained pursuant to the Uniform Commercial Code) or judgment liens (obtained after a successful lawsuit).
Sometimes, these agreements contemplate that the tenant has collaterally assigned its interest in the lease to the lender. (Tenants should note that this type of assignment, even if the lender has not requested a direct agreement with the landlord, may require the landlord’s consent under the assignment provisions of the lease.) While a collateral assignment of the tenant’s interest is security for the lender’s loan, it has a different enforcement mechanism than the security interest in equipment or physical personal property. If the lender exercises its rights under a collateral assignment, it then becomes the tenant. Significant considerations for the landlord in this situation are:
- How much latitude does the lender have to subsequently assign the tenant’s interest in the lease to another operator or tenant? Ideally, this would be the same as is available to the original tenant under the lease’s assignment provisions.
- Upon such a subsequent assignment, will the lender be released from further liability under the lease? Keeping the lender “on the hook” will protect the landlord if the replacement tenant is inexperienced and/or has modest financial strength.
In addition to the tenant’s lender, the landlord likely has its own financing. The landlord should be careful not to grant or waive any rights or benefits that it has granted to its lender or that the landlord is prohibited from granting or waiving under its loan documents. Also, when drafting its loan documents, the landlord’s lender may want to consider that this type of waiver is possible.
These agreements seeking a landlord’s waiver or subordination and its consent come in many different forms. However, trying to incorporate the concepts above will help to protect the landlord in case the tenant defaults and the lender needs to enter the premises to remove its collateral.
Otten Johnson attorneys have substantial experience helping clients negotiate leases. For more information on this Client Alert or for help evaluating your current situation, contact one of our attorneys. For a listing, please click here .
To read the original alert please click here .
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