Recent Developments - Summer 2013
See This Quarter's Notable Closed Deals Below
LIEN ON ME
Like so many apparently simple commercial lease provisions, the devil
is in the detail when it comes to the "landlord's lien" and the
important considerations for both landlords and tenants.
For more information please call (480) 889-8948, send an email to email@example.com or visit www.SteinLawPLC.com.
Arizona law grants commercial landlords a statutory "landlord's lien"
against a tenant's personal property located on the premises to secure
the payment of rent, which also extends to personal property owned by a
subtenant or assignee (but not that of third-parties which may be in the
possession of tenant). Commonly, commercially leases also include
express provisions separately granting such a lien, and sometimes even
going so far as to include granting language for UCC filings and other
mechanics for perfecting such a lien.
The reality of a lien against a tenant's personal property can easily
spark back and forth lease negotiations balancing a tenant's comfort in
allowing such a lien against a landlord's willingness to proceed without
In choosing whether to forfeit their rights, Landlords must balance the
overall creditworthiness of the tenant and the existence of security
for the payment of rent in the form of a guaranty or letter of
credit. Rarely will a security deposit provide amble protection
compared to the right to seize and sell all of the tenant's personal
Tenants should no doubt tread carefully in protecting their personal
property and analyze this risk as part of their overall liability
exposure under the lease. The risk to landlord should be balanced
against the tenant's operating needs. Many tenants utilize outside
financing facilities secured by all of their assets, or put in place
equipment financing or leasing arrangements (i.e., phone systems, office
copiers, etc.). Obviously, these forms of financing are necessary for
tenants to operate and grow their businesses, but tenant's lenders do
not want to fight a landlord for their collateral. While landlords can
agree to subordinate their lien where a tenant's property is subject to
financing that was used to purchase the personal property, issues can
arise when things are not so clear and questions arise as to which party
has priority following a default under both the lease and the loan.
Typically, the landlord's lien will relate back to the date that the
tenant first brings the property onto the premises.
The granting or waiver of a landlord's lien need not be an all or
nothing situation. The parties can certainly agree to limit the
lien to only certain types of property as Landlords are typically most
interested in property that is reusable for a future tenant or items
that can be sold at auction to satisfy the tenant's monetary obligations
and should try to avoid situations that can result in fights with other
Should the parties agree to proceed without the lien, then Tenant's
should require an express waiver and not simply rely on deleting the
provision in the lease to avoid the applicability of the statutory lien
rights available under A.R.S. 33-362. After all, if the lease is
simply silent as to granting of a lien, then the landlord would still
have its lien rights granted by the Arizona statute.
Landlord's liens also raise concerns for some of tenant's customers,
which may entrust tenant with their property (for example, everything
from dry cleaners to law firms). A tenant's property or business records
may be proprietary or confidential. In almost all cases computers,
contain confidential or sensitive information. Caution abounds for
Landlords rely on, or eventually execute, on their lien, as the
statutory requirements and mechanics for holding and selling the
tenant's property can be confusing to navigate.
We help our landlord and tenant clients make the appropriate legal and
business decisions in their leasing activities while staying focused on
the goal of arriving at a successful lease - that can be leaned on.
Stein Law, PLC is a boutique business and real estate deal firm focused on:
Real estate acquisitions and sales, development and leasing (both tenant and landlord);
Business transactions, operating agreements, joint venture structuring and corporate contracts;
Loan financings, workouts and modifications; and
Hospitality development, management and licensing matters.
The following is a link to our Stein Law, PLC Recent Developments Archives:
Below are some of the exciting representations Stein Law handled in 2Q13:
Developer client closed major construction loan for development of large mixed use center (Phoenix, Arizona - June, 2013)
Client transferred/restricted decreed wells and water use rights
under Arizona Water Settlement Act (Graham County, Arizona - June 2013)
Purchase of two side by side multifamily complexes with private
equity and traditional financing (Temp, Arizona - June, 2013)
Client refinanced multiple development properties with various lenders (Arizona - April/May, 2013)
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