What Is a Land Lord’s Lien?
Most commercial leases include a Land Lord’s Lien Clause and many business owners don’t understand that magnitude of it.
A Land Lord’s Lien is generally a clause written into a lease. What the clause does is allow a Land Lord to keep the property within a leased space should the tenant default on the payment of rent. The purpose of the lien is to provide the Land Lord a sense of security that the rents will be paid. Failing the proper payment of the rent, the Land Lord can sell the items within the space as a means to try to recoup the rent they are missing payment on.
Unless a lease speaks to specific items or tenant improvements that are immune to the Land Lord’s Lien, everything within the space that is owned by the tenant is subject to the lien. However, merchandise or items that belong to distributors or contract workers for example, are not included in the Land Lord’s Lien.
While a Land Lord has a right to sell the items per the terms of the Land Lord’s Lien, they must first alert the tenant to the impending sale allowing the tenant the opportunity to pay the outstanding rent, (or at least try to negotiate some other arrangement with the landlord) prior to the sale of the tenant’s belongings.
Many business owners sign leases with Land Lords without reading the lease in its entirety or understanding it fully. Many business owners are shocked to hear they cannot retrieve their expensive equipment or furnishings from a rented space if their business closes prior to the conclusion of their lease.
If you are a Land Lord and you have not been paid your rent, you most likely have the ability to execute a Land Lord’s Lien. However, there are rules that need to be followed and they could differ depending on the state your are located in.
At the end of the day, the Land Lord’s Lien exists to help ensure Land Lords are not stiffed on rent. However, like any contract, the terms of the lien should be discussed and possibly negotiated before the lease is signed.
Are you a Land Lord who would like to exercise a Land Lord’s Lien? Or maybe you are a business owner who is about to execute a lease with a Land Lord? Regardless of which party you are, make sure of where you stand when it comes to a Land Lord’s Lease. Contact L4SB today and let us guide you through the process.