Subordination Agreement Template for Pakistan

A Subordination Agreement changes the priority order of debts or claims when multiple lenders have rights to the same property. In Pakistan's banking sector, these agreements often come into play when a property owner wants to refinance their primary mortgage while keeping existing loans in place.

Under Pakistani financial regulations, these agreements protect lenders by clearly establishing who gets paid first if the borrower defaults. For example, if you have both a home loan and a business loan secured by your property, your bank might require other lenders to "subordinate" their claims, making the home loan take priority. This makes refinancing possible while maintaining clear legal rights for all parties.

Use a Subordination Agreement when you need to rearrange the priority of multiple loans secured by the same asset in Pakistan. Common triggers include refinancing your primary mortgage while having existing secondary loans, or when taking out additional business financing against property that already secures other debts.

Pakistani banks typically require these agreements before approving new loans against encumbered assets. They're especially important during debt restructuring, when getting better terms on your primary loan, or when using the same collateral to secure working capital from different lenders. Having this agreement in place prevents future disputes and makes clear which lender gets paid first if problems arise.

• Bank Subordination Agreement: Used for prioritizing multiple bank loans against the same collateral, common in commercial financing
• Deed Of Subordination: A more formal version registered with land authorities, typically used for real estate transactions
• Landlord Subordination Agreement: Specifically for tenant-related financing, where landlord rights are subordinated to a lender
• Non Disturbance Agreement: Combines subordination with tenant protection clauses, popular in commercial leasing
• Attornment And Non Disturbance Agreement: Comprehensive version that includes tenant recognition of new property owners

• Primary Lenders: Usually banks or financial institutions who want to secure their position as the first-priority creditor on an asset
• Secondary Lenders: Other creditors who agree to take a lower priority position in exchange for maintaining their lending relationship
• Property Owners: Individuals or businesses seeking additional financing while keeping existing loans in place
• Legal Counsel: Corporate lawyers who draft and review the agreements to ensure compliance with Pakistani banking regulations
• Bank Officers: Credit managers and loan officers who evaluate and process subordination requests
• Property Registrars: Government officials who record these agreements when they involve real estate assets

• Loan Details: Gather all existing loan documents, including principal amounts, interest rates, and current payment schedules
• Property Information: Collect complete details of the collateral, including registration numbers and current market value
• Lender Consent: Obtain written agreement from all existing lenders about their new priority positions
• Legal Requirements: Review Pakistani banking regulations for specific subordination rules in your situation
• Document Generation: Use our platform to create a legally-sound agreement that includes all mandatory elements
• Verification Steps: Check all party names, loan amounts, and property details match official records
• Signing Process: Prepare for proper execution with authorized signatories from each institution

• Party Information: Complete legal names and addresses of all lenders, borrowers, and guarantors involved
• Debt Details: Specific description of all loans being subordinated, including amounts and terms
• Priority Structure: Clear statement of new payment priority order among creditors
• Asset Description: Detailed identification of the collateral or property subject to subordination
• Governing Law: Reference to Pakistani banking laws and State Bank regulations
• Default Provisions: Consequences and procedures if borrower defaults
• Execution Requirements: Signature blocks for authorized representatives with witness provisions
• Registration Details: Information needed for recording with relevant Pakistani authorities

A Subordination Agreement differs significantly from an Asset Purchase Agreement in both purpose and structure, though both deal with asset-related rights. While Subordination Agreements rearrange existing creditor priorities, Asset Purchase Agreements handle the complete transfer of asset ownership.

• Primary Function: Subordination Agreements modify lender payment rankings without changing asset ownership, while Asset Purchase Agreements transfer full ownership rights and responsibilities
• Timing of Use: Subordination occurs during refinancing or additional borrowing against existing assets; Asset Purchase happens during complete sale or acquisition
• Party Relationships: Subordination involves multiple lenders adjusting their priority positions; Asset Purchase creates a clean break between buyer and seller
• Legal Effect: Subordination maintains existing loans but reorders their priority; Asset Purchase terminates previous ownership rights entirely