Enforcing Commercial Bailee Waivers in Asset Based Lending Facilities
Executed commercial bailee waivers subordinate statutory warehouse liens, preserve borrowing base liquidity, and guarantee ninety days of liquidation site access.
Landlord Distress Lien
Meaning
A statutory or common law power allows a property owner to seize the belongings of a tenant who has failed to pay rent. This landlord distress lien acts as a security interest in the equipment, furniture, and inventory located on the leased premises. The right is often controversial because it can conflict with the interests of a bank that has a prior lien on the same assets.
Seizure Power
Taking physical control of the tenant’s property is the traditional method of enforcement. The landlord may enter the premises to tag the items or move them to a secure location until the debt is satisfied. This landlord distress lien provides a powerful incentive for the tenant to resolve the arrears quickly to avoid losing their means of production.
Rent Arrears
Unpaid balance amounts determine the scope of the seizure. The value of the property taken should be reasonably proportional to the amount of rent owed. If the landlord seizes far more than is necessary, they may be liable for damages under state laws governing excessive distress.
Asset Limitation
Specific types of property are often exempt from this claim by law. Tools of the trade or essential personal items might be protected to allow the tenant a chance to recover. The existence of a landlord distress lien often requires a lender to obtain a waiver from the landlord to ensure the bank’s security interest remains superior.