“Leasing Equipment That Is Being Used Or Attached To A Third Party Facility Will Likely Require Signed Waivers Prior To Funding”
Any time you are going to utilizing equipment that you want to finance in rented or leased space where the financing is in the form of a lease, you’re likely going to need to get the landlord to sign a waiver.
The waiver is going to state that the leasing company has the right to come onto the landlord’s premise to collect their equipment in the event of a lessee default.
Because financing is in the form of a lease, the leasing company is actually the owner of the equipment as compared to an equipment loan where the business borrower would be the owner.
Why does this matter?
Well, first of all, it is going to be something that the landlord is going to have to sign. So while its not likely going to be a big deal in most cases, you can’t assume that your landlord or landlords will sign off. Therefore, it makes sense to broach this with them before you even apply for equipment lease financing otherwise you could be wasting valuable time.
And if this is a problem, then you will potentially need to be considering other options for financing sooner than later to make sure you don’t run into any timing issues or production or operational delays relating to getting equipment into place.
Where the landlord waiver can become an issue is when you are leasing assets that become attached to the third party rented facility.
A good example of this these days is high efficiency light upgrades.
This type of asset is a lease-able asset in many situations and is permanently affixed and installed into the landlords property.
When presented with a leasing waiver, the landlord may refuse to sign based on the risk that if their tenant defaults on the leasing payments that the leasing company can then come into the landlords building and remove all the lighting being financed.
This would leave the landlord without lights and a big potential mess and cost to deal with.
One way around this is to have both the building lease and the landlord waiver state specifically that in the event of a financing default related to building fixtures that the tenant would be responsible for making sure that the lighting was returned to its original condition prior to the tenant entering into their lease, or something to that effect.
This is an example of how financing needs to be coordinated among a number of different parties at times before being put into place. More specifically, when considering a landlord waiver we have a an applicant business, a leasing company, a landlord, an equipment vendor, and legal counsel for the leasing company and applicant at a minimum.
If you are looking to finance equipment that may require a landlord waiver, consider working with a financing specialist who is versed at coordinating the different parties involved in order to get the required financing in place.