The Bank may take a lien on real estate, the value of which is highly dependent on cash flow from commercial leases of the real estate. The Bank should asses the commercial leases.
Alternatively, where the borrower is in leased space the Bank may obtain a security interest in the lease from the lessee through a Leasehold Deed of Trust. This is recommended where the lease is a “ground lease”, the borrower has an established business on the leased premises, has constructed valuable leasehold improvements on the leased premises or the Bank is taking a security interest in crops, livestock or farm equipment located on the premises.
The Bank may finance and take a lien on tenant improvements to the leased space which consist of fixtures and/or equipment.
This Chapter reviews key lease terms, factors in assessing real estate leases, the process for taking a lien on a tenant/lessee’s leasehold interest and/or leasehold improvements and other important issues impacting lease value.