Additional Risks Landlords Should Consider When Taking Letters of Credit From Commercial Lease Tenants

In the last decade, commercial landlords have favored obtaining from tenants standby letters of credit over security deposits because standby letters of credit provided added security in the event of a tenant's bankruptcy. The financial instability of banks that issue standby letters of credit and the erosion of the benefits of standby letters of credit in recent bankruptcy court decisions have reduced some of the benefits of standby letters of credit in the commercial lease context.

This Advisory describes the benefits and risks of standby letters of credit and the prophylactic measures that a landlord can take when obtaining a standby letter of credit as security for a tenant's obligations under a commercial lease.

Please click here to read the entire Advisory. Thank you to Pillsbury Winthrop Shaw Pittman LLP for allowing us to post this information on our advocacy blog.