Lease Subordination Agreement - Louisiana 2025

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Example of a Subordination Agreement A standard subordination agreement covers property owners that take a second mortgage against a property. One loan becomes the subordinated debt, and the other becomes (or remains) the senior debt. Senior debt has higher claim priority than junior debt.
The lease will include a provision that requires the tenant to subordinate its lease to all existing and future loans. This gives the lender the option, after a foreclosure, to either recognize the lease or terminate it.
Who Benefits From a Subordination Agreement? In real estate, the new lender is the one that would benefit from a subordination agreement, since it would move them up in priority ahead of the other mortgages.
A subordination agreement must be signed and acknowledged by a notary and recorded in the official records of the county to be enforceable.
The Subordination of Lease clause establishes that the tenants lease is subordinate to the liens of any current or future mortgages on the property, giving the mortgage lenders rights priority over the tenants rights.

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What is Subordination? Subordination is putting something in a lower position or rank. Therefore, a subordination agreement puts the lease below the mortgage loan in priority. Mortgage lenders want the leases to be subordinate to the mortgage. That way, the mortgage loan is paid first if there is a foreclosure.

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