Having Issues with a Tenant at Your Commercial Property? How Security Interest Liens May Help

A security interest lien is an effective way for landlords to safeguard their commercial property interests. Whether a tenant has already defaulted on their lease or you simply want assurances of your ability to collect future payments, a security interest lien can serve as a protective measure if your tenant is unable or unwilling to pay their rent. The Uniform Commercial Code (“UCC”) empowers landlords to protect their property interests through liens, and specific UCC sections provide detailed guidelines and rights associated with security interest liens.

The “UCC,” is a set of laws that regulates certain business activities, including sales of goods and secured transactions. By incorporating the UCC, Colorado embraces the UCC drafters’ intentions of standardizing interstate commerce for equal trade requirements.

What is a Lien?

Generally speaking, a lien is a legal claim on an asset that allows the lien holder to access or repossess property if the owner defaults on payments. To this end, a landlord lien is a claim that landlords can place on their property to secure their interest in the property.

In some states, landlords have an automatic lien against a tenant’s personal property on the leased premises, but Colorado does not provide these automatic liens. In Colorado, if a landlord wants to attach a lien to a tenant’s personal property, inventory, equipment, or fixtures at the premises, then the landlord must follow the UCC’s guidelines to obtain a security interest through a lien.

How Can I Obtain a Security Interest Lien?

Using the processes outlined in the UCC, a landlord must attach a lien to their property and perfect their interest through meeting certain filing requirements. Both of these processes are technical and have many codes that outline the steps and define the terms of art. The security interests created by landlord liens are strong legal interests, so the proper steps to attaching and perfecting an interest must be followed precisely for a landlord to enforce their rights.

What Rights Accompany a Security Interest Lien?

Landlords can obtain a variety of rights from a security interest lien depending on their interest in the property, the amount of debt the tenant owes the landlord, and the property to which the lien is attached. For example, if the tenant is an entity, the landlord can attach an interest on collateral that the tenant owns, like inventory and equipment. In these instances, if a tenant defaults on payments, then the landlord can seize the property to which the security interest is attached.

To be clear, there are specific guidelines that must be followed to attach security interests to particular items, and there are equally specific guidelines for exercising the right to seize or take control of collateral property. However, if security interest liens are properly attached and perfected, they can be used very effectively to protect a landlord’s interests. For example, security liens can be used to seize and liquidate a tenant’s collateral to provide money when a tenant defaults.

How GLO Can Help

Security interest liens provide effective means for landlords to protect their interests in investment properties. By being aware of the legal concepts underlying security interest liens, you can lower your financial risk through properly obtaining a security interest lien. The Geraghty Law Office is well versed in the provisions of the Uniform Commercial Code.

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GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific signed fee agreements. GLO does not guarantee any results.

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