The Lease Subordination Agreement is a crucial document in Malaysian real estate financing transactions where a property owner seeks to obtain or refinance a loan while having existing tenants in the property. This agreement is necessary when a lender requires its security interest to have priority over any existing leases, which is common in commercial property financing. The document balances the lender's need for security with the tenant's need for occupancy protection, typically including subordination, non-disturbance, and attornment provisions. It must comply with Malaysian property laws, particularly the National Land Code 1965 and related regulations, and usually requires registration with the relevant land office. The agreement becomes particularly important in development projects, refinancing situations, or when significant tenants occupy the mortgaged property.
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1. Parties: Identifies all parties to the agreement: Landlord, Tenant, and Lender
2. Background: Recitals explaining the existing lease arrangement, the loan/security arrangement, and the purpose of the subordination
3. Definitions: Defines key terms used throughout the agreement including Property, Lease, Security Documents, and Loan Agreement
4. Subordination: Core provision stating that the lease and all rights thereunder are subordinate to the lender's security interest
5. Acknowledgment and Consent: Tenant's acknowledgment of the lender's rights and consent to the subordination arrangement
6. Non-Disturbance: Lender's covenant not to disturb tenant's possession if tenant is not in default
7. Attornment: Tenant's agreement to recognize lender as landlord in case lender takes possession
8. Notice Requirements: Procedures for giving notices between parties, including default notices
9. Governing Law and Jurisdiction: Specifies Malaysian law as governing law and jurisdiction for disputes
10. Execution: Formal execution block for all parties to sign
1. Multiple Tenant Provisions: Additional provisions required when there are multiple tenants in the property, addressing priority between different tenants
2. Insurance Requirements: Specific insurance obligations if required by the lender
3. Assignment and Transfer: Provisions governing the assignment of rights under the agreement, if transfers are anticipated
4. Representations and Warranties: Additional confirmations required by any party, particularly regarding authority and title
5. Further Assurance: Obligations to execute additional documents if required for registration or enforcement
6. Costs: Provisions regarding who bears the costs of preparing and registering the agreement
1. Property Description: Detailed legal description of the property including lot number, title details and address
2. Copy of Lease: Copy of the existing lease agreement being subordinated
3. Security Documents: Copies or details of the relevant security documents having priority
4. Form of Notice: Prescribed format for notices under the agreement
5. Registration Particulars: Details required for registration under Malaysian land law
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