Subordination in United States
Practical Information
Note: Some of this information was last updated in 1982
An instrument signed by one having an interest in, or LIEN upon, property declaring that such interest or lien is placed in a lower order or rank than another interest or lien, such as mortgage (in U.S. law) or lease (in U.S. law). Subordination of lease to mortgage. Placing an existing lease in an order or rank lower than that of a new mortgage on a leased property. It sometimes becomes necessary for the owner of leased property to obtain a loan secured by a mortgage on the property. The lender may be unwilling to accept the property as security burdened with the prior lease. The usual procedure is to obtain from the holder of the lease (lessee), for a consideration, a waiver (in U.S. law) of his priority in favor of the new mortgagee. This waiver is known as a “subordination agreement.” The agreement may be made between the lessee and the lender (mortgagee); the owner (lessor) is not a necessary party, although in many instances, he or she joins in the agreement as a matter of formality.
What is Subordination?
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See Also
Further Reading (Articles)
Complete vs. Partial Subordination: Avoiding Surprises in Circular Priorities of Claims, American Bankruptcy Institute Journal; July 1, 2007; Misken, Kenneth M
Using Subordination to Define Intercreditor Priority: Lenders Use Subordination to Put Their Interests Ahead of Other Creditors and to Reduce Their Loss Given Default. It’s Not Something That Can Be Left to the Lawyers to Work Out, The RMA Journal; November 1, 2009; Carleton, Ronald Delaney, Timothy
Spotlight on Security Documents: Reflecting Your Subordination, Mondaq Business Briefing; January 2, 2013
Intercreditor/Subordination Agreements In The Second Lien Generation., Mondaq Business Briefing; July 24, 2007
Appellate Court Rules Secured Creditors Can Switch Priorities Pursuant to A Subordination Agreement If the Subordinating Creditor’s Security Interest Is Enforceable, Mondaq Business Briefing; March 20, 2013
A Defense of the Doctrine of the Eternal Subordination of the Son, Journal of the Evangelical Theological Society; September 1, 1999; Kovach, Stephen D. Schemm, Peter R., Jr.
Loan Groups Protest Enron Equitable Subordination Ruling., Mondaq Business Briefing; April 4, 2006
District Court Holds That Bankruptcy Claims Purchased In Good Faith Are Not Subject To Equitable Subordination Claims.(Case overview), Mondaq Business Briefing; September 26, 2007
Equitable Subordination: Tool for Ch. 11 Talks.(News), Bank Loan Report; August 17, 2009
Appointment of Receiver Mandatory in Indiana, Notwithstanding Subordination Agreement, Mondaq Business Briefing; August 23, 2012
No Court Approval Needed for Creditor Seeking Equitable Subordination of Another’s Claim, American Bankruptcy Institute Journal; November 1, 2008; Rosenblatt, Andrew
A New Subordination Rule Entered Into Force: The Role Of Related Party Creditors In Bankruptcy Post Amendment To The Slovak Bankruptcy Act., Mondaq Business Briefing; April 16, 2012
Subordination Agreement Case Highlights Conflict with State Law, American Bankruptcy Institute Journal; December 1, 2004; Mikels, Richard E Walker, Adrienne K Bollerup, Sara R
Mandatory Subordination under Section 510(b) Extends to Claims Arising from Purchase or Sale of Affiliate’s Securities, Mondaq Business Briefing; April 1, 2014; Oellermann, Charles
Absence Of Actual Harm To Creditors Defeats Equitable Subordination Bid., Mondaq Business Briefing; October 29, 2008
Understanding the lease subordination clause., Real Estate Weekly; March 9, 2011; Wieder, Marc
Xetus Deploys LOS Version for Subordination Market, Mortgage Banking; November 1, 2009
In re Yellowstone Mountain Club: equitable subordination to police inequitable conduct by non-insider creditors., North Carolina Banking Institute; March 1, 2010; Montes, Marina
All’s Fair In Equitable Subordination; Little-used theory may show its face in courtrooms more often, particularly as a negotiating tactic in bankruptcy cases.(Restructuring), Investment Dealers’ Digest; August 21, 2009; Sheahan, Matthew
Claim Purchasers Beware: No Good-Faith Defense to Equitable Subordination, American Bankruptcy Institute Journal; February 1, 2006; Kotler, Lawrence
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