Subordination Agreements

Our White and Bright real estate attorneys assist clients with all types of subordination agreements relating to real estate. Subordination agreements, which change the otherwise chronological priority of liens on a property, are often necessary when a borrower is obtaining financing and entering into a loan agreement. This is because the lender wants to be able to protect its interests in the event the borrower defaults on the loan: when a property is foreclosed, the proceeds of the sale of the property are distributed to the creditors in a certain order, and creditors with lower priorities may see very little - and even possibly none - of the proceeds from the sale. A subordination agreement allows a creditor who otherwise has a low position of priority to move up on the list, meaning that the creditor will be able to receive funds from a property sale earlier in the order of creditors than would otherwise have been the case.

There are two major types of subordination agreements:

  • executory subordination agreements, where the creditor's ranking will be lowered according to the terms of the agreement
  • automatic subordination agreements, where the creditor's ranking will be lowered automatically upon the execution of the agreement

Subordination agreements are strictly regulated by California law, and state law on these agreements is complex. Our real estate attorneys have the requisite experience and knowledge to assist clients with these agreements, regardless of the situation in which the need for the agreement arises. We prepare agreements for clients as well as review documents provided by another party. We also ensure that the client fully understands the nature and terms of the agreement. If necessary, we can also assist in negotiating the terms of a subordination agreement.

We welcome you to contact us about how we can assist you with a subordination agreement.