As a small business owner, finding the right space to rent for your business can be a daunting task. But once you’ve found the perfect space, you’ll need to negotiate with your landlord in order to secure the lease and start doing business. One term that may come up in these negotiations is the SBA landlord subordination agreement.
This agreement is a legal document that is used to define the relationship between a landlord and a tenant who is seeking financing from the Small Business Administration (SBA). The purpose of the agreement is to protect the landlord’s interests in the property by subordinating their right to collect rent and other payments to the SBA’s interest in the property.
Essentially, the SBA landlord subordination agreement states that the landlord will not take any action that would interfere with the SBA’s security interest in the property. This means that the landlord cannot evict the tenant or take any other actions that would impact the tenant’s ability to continue operating their business, without first obtaining the SBA’s consent.
Why is this agreement important? If the landlord were to take any actions that would interfere with the SBA’s security interest in the property, it could jeopardize the tenant’s ability to continue operating their business. If the tenant were to default on their SBA loan, the SBA would have the right to take possession of the property, which could result in the landlord being left with an empty space and no rent payments.
By signing an SBA landlord subordination agreement, the landlord is agreeing to subordinate their rights to the SBA’s interest in the property. This means that they understand the risks involved in renting to a tenant who is seeking SBA financing, and they are willing to take those risks in order to secure a tenant for their property.
As a small business owner, it’s important to understand the terms of any lease you sign, including any additional agreements or documents that may be required. If you’re seeking SBA financing for your business, your landlord may require you to sign an SBA landlord subordination agreement. Before signing any documents, make sure you understand the terms and implications of the agreement, and seek the advice of a qualified attorney if necessary.
In conclusion, the SBA landlord subordination agreement is an important legal document that is used to protect both the landlord and the tenant in a lease agreement. By understanding the terms and implications of this agreement, small business owners can make informed decisions about their lease agreements and protect their businesses from unnecessary risks.