Real Estate Subordination Agreement for the United States

Real Estate Subordination Agreement Template for United States

A Real Estate Subordination Agreement is a legal document used in the United States that establishes the priority of liens or mortgages on a property. It allows one lender to voluntarily take a junior position to another lender, typically used when refinancing or obtaining additional financing. The agreement must comply with state-specific real property laws and local recording requirements, and it establishes the rights and obligations of all parties involved in the event of default or foreclosure.

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What is a Real Estate Subordination Agreement?

A Real Estate Subordination Agreement becomes necessary when multiple loans exist or are being created against a single property, and lenders need to establish their respective priority positions. This document is particularly common in refinancing situations or when property owners seek additional financing while maintaining existing loans. In the United States, these agreements must conform to both federal and state-specific real estate laws, and they typically detail the terms of subordination, including the specific loans involved, the property description, and the rights of each party in various scenarios such as default or foreclosure. The agreement protects all parties by clearly documenting their positions and rights in the lending hierarchy.

What sections should be included in a Real Estate Subordination Agreement?

1. Parties: Identification of all parties: Senior Lender, Junior Lender, and Property Owner

2. Background: Description of existing loans, their recording information, and purpose of subordination

3. Definitions: Key terms including Senior Debt, Junior Debt, Property, Security Instruments

4. Subordination Terms: Core agreement terms establishing new lien priority

5. Representations and Warranties: Statements of fact by all parties regarding their authority and loan status

6. Notice Provisions: Requirements for communication between parties

7. Execution: Signature blocks and notary acknowledgments

What sections are optional to include in a Real Estate Subordination Agreement?

1. Cross-Default Provisions: Optional terms regarding default on one loan affecting the other - used when parties want defaults to trigger across loans

2. Modification Restrictions: Optional limitations on changing loan terms - used when senior lender wants to restrict junior loan modifications

3. Insurance and Condemnation Proceeds: Optional provisions for distribution of insurance or condemnation payments - used when specific allocation of proceeds is desired

What schedules should be included in a Real Estate Subordination Agreement?

1. Schedule A - Property Description: Legal description of the subject property

2. Schedule B - Senior Loan Documents: List of senior loan documents being subordinated to

3. Schedule C - Junior Loan Documents: List of junior loan documents being subordinated

4. Schedule D - Recording Information: Details of previous recordings affecting the property

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

United States

Publisher

Genie AI

Cost

Free to use

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