Advising on termination of a U.S. commercial lease and enforcement of a security interest in business assets

In a matter where a company operating a commercial facility in the United States faced termination of its lease and a lockout from its premises over unpaid rent and loan obligations, we reviewed whether the landlord's actions were lawful and the tenant's options for responding.

The key issues were whether the requirements for default and termination under the lease had been met, and the statutory procedures required for the landlord to lock the tenant out of the premises.

Other issues included the scope of the landlord's security interest in the inventory, equipment, and business-related intangible assets in the store, and whether the disposition of those assets was lawful.

We analyzed the lease, its amendments, and the loan agreement, and reviewed the lawfulness of the termination and lockout under the Uniform Commercial Code (UCC).

We also distinguished the contractual security interest from the statutory landlord's lien, analyzed the notice requirements and commercial reasonableness requirements for disposing of collateral, and evaluated the practical benefits of remedies such as a temporary restraining order (TRO) and a damages claim.

We advised that while it might be difficult to challenge the termination of the lease itself, separate legal restrictions apply to the disposition of business assets owned by the tenant.

In particular, focusing on possible defects in the enforcement of the security interest, we proposed a strategy combining a demand to halt the disposition of assets, emergency protective measures, and negotiation.

Related U.S. practices: Business & Commercial Disputes