Collateral access agreements (“CAAs,” also commonly known as “landlord waivers”) are useful for minimizing cost, maximizing speed of recovery of assets, and ensuring access to a borrower’s books and records for a secured lender. As lender’s counsel for C&I loans, we care about getting CAAs for locations leased by a borrower where the borrower has significant inventory or equipment, or paper copies of key financial records stored at the location. A CAA creates an agreement between the landlord and the lender (in legal terms, “privity of contract”) so that a lender has contractual access to the leased property upon an event of default under a borrower’s loan. While credit agreements and/or security agreements include a grant of access to lenders by borrowers to the borrowers’ locations for recovery of collateral and examination of records, there are situations where such a grant is insufficient for lenders to legally enter the leased properties (e.g., the lease has terminated, the borrower has “gone dark” at the location, etc.). While not applicable to Massachusetts, many states grant statutory liens to a landlord covering the assets of a borrower securing unpaid amounts under leases. It is important to waive or subordinate such liens to the security interest of a lender.
It is also important to note the distinction between a full waiver by a landlord as opposed to a subordination of a landlord’s lien. Landlords increasingly push back against outright waivers of their lien (in states where there are statutory liens or in the situation where a tenant has granted a landlord a security interest in the tenant’s assets) and instead agree to subordinate their lien (i.e., ranking their lien below the lender’s in priority, rather than relinquishing it entirely). The two are not interchangeable, and a lender should understand the practical difference: a subordination leaves the landlord as a junior secured creditor who may still assert rights in bankruptcy, while a true waiver eliminates the landlord’s claim entirely. This distinction has become a central negotiating point in CAAs.
If a lender has not obtained an executed CAA in a loan transaction and such lender seeks recovery of its collateral on a defaulted loan, the lender must resort to judicial process — such as a replevin action or a request for a temporary restraining order — to obtain access to and possession of its collateral, or to prevent a landlord from disposing of the collateral. This results in added time and cost to the lender. If the loan is under-collateralized, this cost will be borne by the lender.
Since the 2008 financial crisis and again following the disruptions caused by the COVID-19 pandemic, landlords have been negotiating the form of CAAs much more heavily. The most important points for lenders negotiating landlord waivers involve: (i) maintaining sufficient time periods for recovery of assets; (ii) potential on-site sales of heavy machinery (or other difficult to relocate collateral); and (iii) objecting to involuntary terminations or abandonment of the lender’s security interest. In addition, a landlord will often seek to add provisions to a CAA which include: (i) the lender’s obligation to restore and indemnify the landlord for any damage caused during access or removal; (ii) restrictions on notice and rights of the lender to cure tenant defaults under the lease before the landlord can terminate; (iii) the fixture vs. personal property distinction (landlords resist waiving rights to fixtures that may be part of the real estate, even if financed by the lender); and (iv) an attempt to pass the legal fees incurred by a landlord for review and negotiation of the CAA onto the tenant.
For loans guaranteed by the U.S. Small Business Administration (“SBA”), CAAs carry additional regulatory significance. Under the SBA’s current Standard Operating Procedure (SOP 50 10 8, effective June 1, 2025), when a substantial portion of loan proceeds are used for leasehold improvements or a substantial portion of collateral consists of leasehold improvements, fixtures, or equipment attached to leased premises, the lender must attempt to obtain an assignment of lease and landlord’s waiver and document any failure to do so.
One of the challenges in negotiating CAAs with a landlord is that the tenant (and the lender) have very little leverage to obtain a CAA acceptable to a lender when the existing lease has already been negotiated and signed. The best time to negotiate a CAA (as well as any collateral assignments of the lease) is prior to lease execution. Lenders should be alert to lending situations (such as business acquisitions) where the lease has not yet been signed or a lease amendment is still under negotiation and provide the borrower with a proposed form of CAA. In such situations the borrower should have some leverage with the landlord to advocate for the preferred form of CAA on behalf of the lender. This is often best done right after the lender’s term sheet or commitment has been signed by the borrower.
As always, please contact us if you have questions on this or any other lending or business topic.
This communication is for informational purposes only and is not legal advice on any specific facts or circumstances. In addition, the firm undertakes no obligation to update the information discussed in the foregoing article.