Back to News

Key Points: Financing Leasehold Interests in Real Estate

Published on

May 4, 2015
  1. Merely adding the word “leasehold” to your standard mortgage form does not create an effective leasehold mortgage.
  2. Scrutinize the underlying lease – often it is a ground lease. Does it:
    1. Allow the tenant to grant a leasehold mortgage?
    2. Have a term longer than the loan?
    3. If not, have extension options the lender may utilize?
    4. Have purchase options the lender may utilize?
    5. Have predictable rent?
  3. Check the title to the fee estate (landlord/owner) and not just the leasehold estate (tenant/mortgagor).  Assure the lease or a memorandum has been recorded.
  4. If the landlord’s/owner’s interest is subject to a mortgage, obtain a non-disturbance agreement which specifically addresses the leasehold mortgage situation.
  5. The lease cannot be permitted to “disappear”!  The lender must be able (under the lease or with the landlord’s agreement) to:
    1. receive notice of the tenant/borrower’s default;
    2. cure a tenant default and receive extra time to do so;
    3. obtain possession of the premises to cure; and
    4. receive a waiver of non-curable defaults (or a new lease).
  6. The potential responses to a bankruptcy filing by the tenant/borrower and by the landlord must be addressed – in the leasehold mortgage.
  7. Consider whether restrictive use provisions in the lease will diminish your collateral value (the lease) if you are forced to address a loan default.
  8. A leasehold mortgage can be enforced through foreclosure…but consider additional remedies: the granting of a new lease or the assignment of the lease to a new tenant.  The lease should have a “no merger” clause.
  9. Address the lender’s right to enforce the lease, consent to amendments, receive insurance proceeds, and obtain possession.
  10. Do you really want to take on the complexity of mortgaging a sublease?

Related News

View More News
Press Release
July 23, 2025

Barley Snyder Partner Stacey MacNeal Appointed to YWCA York Board of Directors

For Immediate Release York, Pa. – Barley Snyder is pleased to announce that partner Stacey R. MacNeal has been appointed to...

Learn More
Press Release
July 18, 2025

Barley Snyder Attorneys Named to 2025 Top Lawyers of Chester County List by Daily Local News

For Immediate Release Lancaster, Pa. – Four Barley Snyder attorneys – Salvatore Anastasi, Zachary J. Daly, Michael W....

Learn More
Press Release
July 14, 2025

Barley Snyder Partner Troy Rider Named to Lehigh Valley Business 2025 Power List for Lawyers & Lobbyists

For Immediate Release Reading, Pa. – Barley Snyder is pleased to announce that partner Troy B. Rider has been named to the ...

Learn More

Other Upcoming Events

View All Upcoming Events
Oct
07
2:30 pm
-
6:00 pm
event
Location

2025 York Business Seminar

Learn More
Oct
14
2:30 pm
-
6:00 pm
event
Location

2025 Harrisburg Business Seminar

Learn More
Oct
30
2:30 pm
-
6:00 pm
event
Location

2025 Lancaster Business Seminar

Learn More

Get in Touch

Our attorneys, paralegals and staff look forward to hearing from you. Please reach out to let us know how we can help.

Get In Touch
RECOGNIZED IN
Super Lawyers
Best Law Firms US News
Best Lawyers