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What does section D.2 of the Security Instrument mean for the Lender and the Borrower?

The Borrower has the right to modify the lease as long as it doesn't decrease the rental amount or shorten the rental term but doesn't have the right to terminate or modify the lease if it will decrease the rents or shorten the term of the loan term.

The borrower, per section D.2, does not have the right to terminate or modify the lease if it will decrease the rents or shorten the term of the lease without the written consent of the Lender.  If the proposed modification will decrease the rents or shorten the term of the lease, that is an Event of Default and would nullify the modification or termination.  At that point, the lender could provide notice to the Borrower it is going to exercise its rights to modify the Lease,  and the Lender would have the right to negotiate any lease modification or termination, not the Borrower.

Section D.1 states, "As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower's right, title and interest in, to and under the Leases. Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only."

The above states that the Borrower assigned and transferred all of its rights to modify, terminate, or extend the Lease to the Lender.  So, if an Event of Default occurs and the Lender provides notice to Borrower it is going to exercise its rights to modify the Lease,  the Lender has the right to negotiate any lease modification or termination, not the Borrower.  But that notice must be given to the Borrower after an Event of Default per section D.2.  Once this occurs the Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

Absent of an Event of Default, the Borrower has the right to modify the lease as long as it does not decrease the rental amount or shorten the rental term.