Landlord Waivers in Ontario: Why Lenders Ask Landlords to Subordinate Their Claim

If your business is financing equipment that will sit inside a leased shop, warehouse, or office, don't be surprised when the lender's paperwork includes a request that has nothing to do with you directly — a landlord waiver, addressed to your landlord. Many lenders simply won't advance the money without one.

The reason is straightforward once you see it from the lender's side: a commercial landlord in Ontario generally has a remedy for unpaid rent that lets them go after goods sitting on the premises, including equipment that a lender may be counting on as collateral. A landlord waiver is how the lender tries to make sure that if things go wrong, its claim on the equipment comes first.

Here's how these waivers typically work, what they cover, and what landlords tend to want before they'll sign.

Why Lenders Ask for a Landlord Waiver

A lender that finances equipment usually takes a security interest in it, registered under Ontario's Personal Property Security Act (PPSA). But that registration doesn't automatically resolve every competing claim to the same equipment — a landlord's own remedies against goods on the premises come from a separate area of law entirely. Rather than leave that overlap to be sorted out in a dispute after default, the lender asks the landlord to sign away, or subordinate, any claim it might otherwise have over the specific financed equipment.

Without a waiver, a lender risks a scenario where its collateral is sitting on someone else's property, and that someone else has an independent claim to it that the lender didn't bargain for.

How the Waiver Typically Gets Negotiated

1. The lender identifies the collateral. Before funding, the lender confirms the equipment will be located on leased premises rather than owned property.
2. The lender requests a waiver as a funding condition. This is usually built into the financing commitment — no signed waiver, no advance.
3. The tenant approaches the landlord. Since the tenant needs the financing, it's often the tenant who first raises the waiver with the landlord, sometimes with the lender's standard form in hand.
4. Landlord and lender negotiate terms. Landlords rarely sign a lender's first draft without changes — see below for what they typically want.
5. The waiver is signed and kept with the loan file. The lender retains it alongside its security registration in case it's ever needed.

What a Landlord Waiver Usually Covers

• A waiver (or subordination) of the landlord's distress or lien rights over the specific, identified equipment — not a blanket waiver over everything in the leased space.
• A right for the lender to enter the premises to inspect, remove, or sell the equipment if the borrower defaults on the loan.
• An acknowledgment period during which the landlord agrees not to dispose of or interfere with the equipment while the lender arranges removal.
• Confirmation of basic lease facts (an "estoppel"-style statement) so the lender knows the lease is in good standing.

What Landlords Want in Return

Landlords are not required to sign these, and most negotiate before agreeing. Common asks include:

• An indemnity so the lender (not the landlord) bears responsibility for any damage caused while removing equipment.
• A defined, reasonable window for removal, so the space isn't tied up indefinitely while the lender arranges logistics.
• No disruption to other tenants or to the landlord's ability to re-lease the space promptly.
• Sometimes, reimbursement of the landlord's reasonable costs in reviewing and signing the waiver.

Before You Sign: A Quick Checklist

• [ ] Is the waiver limited to specifically identified equipment, or does it read as a blanket waiver over everything in the space?
• [ ] Does the waiver make clear that the landlord's other rights under the lease (rent, other defaults) are otherwise unaffected?
• [ ] Is there a clear indemnity for any damage caused during removal?
• [ ] Is the removal window and access process spelled out clearly enough to avoid disputes later?
• [ ] Has each side — landlord, tenant, and lender — actually had the document reviewed, rather than treating it as boilerplate?

Landlords negotiating their own lease terms more broadly may also want a commercial real estate review of the underlying lease alongside the waiver itself.

Frequently asked questions