The Mortgage Subordination Agreement is a critical document in New Zealand's property financing landscape, used when there are multiple security interests in a property and there is a need to modify their priority ranking. This document type is commonly required in situations such as refinancing, property development projects, or when additional security is needed for further borrowing. The agreement must comply with New Zealand's Property Law Act 2007 and Land Transfer Act 2017, and typically requires registration with the Land Registry. It sets out the terms under which a senior mortgagee agrees to subordinate their priority to another mortgagee, includes details of all security interests involved, and specifies the new priority arrangement. The document is particularly important in commercial property transactions but is also used in residential contexts where multiple lenders are involved.
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1. Parties: Identifies all parties to the agreement including the mortgagor (property owner) and all relevant mortgagees
2. Background: Recitals explaining the existing mortgages, their registration details, and the purpose of the subordination
3. Definitions: Defines key terms including 'Senior Debt', 'Subordinated Debt', 'Property', and 'Security Interests'
4. Acknowledgment of Existing Security Interests: Confirms the existing mortgages and their current priority status
5. Agreement to Subordinate: Core provision where the senior mortgagee agrees to subordinate their priority to the other mortgagee
6. Priority Arrangements: Details the new priority structure and how it affects rights and enforcement
7. Representations and Warranties: Standard warranties about authority to enter agreement and validity of security interests
8. Duration and Termination: Specifies how long the subordination remains in effect and any termination conditions
9. General Provisions: Standard boilerplate including notices, amendments, governing law, and execution requirements
1. Consent of Mortgagor: Additional section when explicit consent of the property owner is required or desired
2. Further Advances: Include when the agreement needs to address future lending under either mortgage
3. Cross-Default Provisions: Optional section dealing with how defaults under one mortgage affect rights under the other
4. Security Trustee Provisions: Required when one or more mortgagees act through a security trustee
5. Assignment and Transfer: Include when parties want to specifically address ability to assign rights under the agreement
1. Schedule 1 - Property Description: Legal description of the mortgaged property including title references
2. Schedule 2 - Senior Security Details: Details of the senior mortgage including registration number, date, and amount
3. Schedule 3 - Subordinated Security Details: Details of the subordinated mortgage including registration number, date, and amount
4. Appendix A - Priority Structure: Diagram or detailed explanation of the priority arrangement between the mortgages
5. Appendix B - Form of Registration: Template for registering the subordination arrangement with the land registry
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