Once upon a time, commercial landlords routinely required that prospective tenants post cash security, a letter of credit or a parent guaranty to provide assurance to the landlord and its mortgage lender that the tenant could pay the rent. Commercial landlords owned bricks and mortar assets, many were large public companies, and the notion of the landlord itself failing, was beyond the pale. The mortgagee was a local bank, some venerable insurance company or a “trustee” of one kind or another. Surely the institutional mortgagee would stand behind the landlord in the rare instance that the landlord might fail.
That was then. This is now.
Today, most every tenant who is asked for financials, to post security or deliver a deep pocket guaranty is asking the same of its landlord, and in many instances, demanding financial assurances from the mortgagee who’s underwriting and financial strength standing was once beyond reproach. The rules of engagement have changed. This article will explore some of the ways that the dynamic of negotiation between and among the tenant, the landlord, the lender or other interested third parties have changed from then to now.
