Meaning
Legal instruments signed by storage facility operators to relinquish their right to hold goods as security for unpaid storage fees. These documents are a standard requirement for asset-based lenders who want to ensure they have first priority access to the inventory of a borrower. Without warehouse lien waivers, a storage company could prevent a lender from seizing collateral during a default.
Collateral Priority
Lenders need to know that their claim on the assets is superior to that of any third party. By signing warehouse lien waivers, the facility owner agrees to notify the lender of any defaults and allows the lender to remove the goods if necessary. This agreement clarifies the hierarchy of claims in a bankruptcy scenario.
Possession Right
The law often grants warehouse operators an automatic lien on the property they store until their invoices are paid. Warehouse lien waivers modify this relationship to protect the interests of the financing institution. This ensures that the lender can liquidate the inventory without first paying off the storage provider’s old debts.
Creditor Protection
Verifying that these documents are in place is a key step in the due diligence process. If a borrower uses multiple storage locations, warehouse lien waivers must be obtained for every single facility. The absence of a waiver usually leads to the exclusion of that inventory from the borrowing base.
