Don’t let your landlord’s lender amend your lease without consent
In my practice, I commonly negotiate commercial leases for tenants. Many of the initial drafts that I receive from landlords include a provision permitting the landlord to make any changes to the lease that their lender (either current or future) might require. The problem is that these provisions allow the tenant’s lease to be amended or modified without their prior consent. For example, a lender might want to greatly extend the time period that the landlord and the lender have for curing a default by the landlord under the lease. Clearly as a tenant you want the chance to review or negotiate any changes to your lease, which is why I advise all clients that this language be completely removed from their lease.
But what if your landlord won’t agree to delete this provision? At the very least, I recommend adding language in your lease that such amendments cannot increase your obligations or impair your rights under the lease.
Landlords can also include similar rights in less obvious ways. I often see lease agreements that provide that the tenant consents to their lease being subordinated to future mortgages. Included in this language is usually a requirement that the tenant agrees to sign a subordination agreement on the lender’s standard form to confirm such subordination. The lender’s form will most likely include provisions that amend the terms of your lease and allow changes to be made without your consent.
It is important that such subordination language in your lease require that the agreement be in a commercially reasonable form. As the tenant, you don’t have to agree to such a subordination unless the lender agrees to include language that if they succeed to the interest of the landlord under the lease they will not disturb your use and occupancy of the premises pursuant to the terms of the lease.
It is always important when negotiating a lease to make sure that any amendments to it must be in writing and agreed to by both the landlord and tenant. Contact our Real Estate group if you have questions about commercial leasing.