SBA Debt Forgiveness - Landlord Release: A Possible Benefit

Frequently, the banks require a landlord release to support a loan to be made to the borrower / tenant. Usually landlords resist this, as it is certainly not to their advantage, however they usually succumb as they want the tenant and the banks will typically refuse to lend without such a document.

What it means is the bank requires that the landlord refrain from litigation or many other aggressive legal maneuvers available to them in deference to the bank's position which puts the bank in greater control of the borrower's destiny, removing major weapons from the lessors.

Recently, this was a huge benefit for our client as the bank was willing to be far more lenient in working with the borrower than the landlord was, but because of the landlord waiver, the bank, through its counsel at its expense, forced the landlord to sit back and follow the bank's lead, not suing for various breaches he could have had he not signed a waiver. This allowed us more time with less expense in working out our debt issues.

Many tenants have the benefit of a landlord waiver without knowing it, understanding it, or utilizing it in their survival and turnaround strategy.

It is meant to protect the banks' interests and deprive the landlord the opportunity of interfering with the banks' plans by pre-empting them with a foreclosure or eviction and possession suit.

It is difficult to generalize as a waiver can be written many ways, what is important is to make certain the bank has acquired it and then to understand what its terms and conditions are so you can best utilize it for your benefit. It can be a real show stopper at the right moment.

Check it out, call your banker and ask him if he has it and can you get a copy of it to review. This of course will raise the concern of the bank but at the point in time you need this, raising the banks concern is the least of your issues.

It is also a good negotiation point, reminding the landlord that his powers are limited by such an agreement and moving him closer to a positive settlement that he may be reluctant to submit to, but more inclined because of the waiver. It usually is a good tool to have.