A Note Of Caution Before Granting Waivers, No Interest Letters And Estoppels

A lender holding security interests in a borrower's property may be asked by the borrower or a third party to provide a waiver, no interest letter, estoppel or similar confirmation (each referred to as a "waiver") that the lender has no security with respect to certain specific property of the borrower. The lender may be inclined to issue such a waiver in order to maintain a good relationship with its borrower.

While these waivers are often viewed on a commercial level as inconsequential documents, they can have a greater impact than intended on the rights that are being waived.  It is important that the lender understands the rights that are being forfeited under the waiver. Typical waivers do not subordinate the lender's priority to the identified third party as against certain collateral, but rather, completely disclaim the lender's interest in that collateral. In that case, the lender may not be entitled to any of the proceeds of the specific collateral even if