Speaking to BBC Radio Sheffield he said: "Paddy has always been a key member of the squad but everyone has to adhere to the rules.
"Paddy still has 18 months left on his contract but we're not in a position to offer him a new deal yet and I think that has frustrated him.
"We sat down and I said Paddy, if you think there a clubs wanting you out there then you can go on the transfer list. I knew I had Ian Bennett so it wouldn't come as a problem to me."
There are rumours suggesting that Kenny could be swapping Lanes. Tottenham Hotspur are supposedly to put a bid in for the shot stopper who was approaching 300 appearances for the Blades.