What does this MEAN?? SUBORDINATION: The Lease is subordinate to all existing......

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General Landlording & Rental Properties
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What does this MEAN?? SUBORDINATION: The Lease is subordinate to all existing......

Christopher VeljkovicPro Member
Rental Property Investor · Morris County, NJ · Member since 2017 · 130 posts · 35 votes

Hey BP,

Over looking my lease agreement  and came across this:

SUBORDINATION: The Lease is subordinate to all existing and future mortgages, deeds of trust and other security interests on the Premises.

What does this mean? and is this beneficial to have? and if so why?

Thank you ahead of time

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Ryan Lesley
Real Estate Agent · Fort Collins, CO · Member since 2023 · 171 posts · 116 votes
3y

Hey Christopher, 

I'm sure others can shed more detail on the subject, but my understanding is that as far as its purpose: it's disclosing that the lease will rank last to be reconciled, in realation to other liens/ property rights, should there be dispute or collection proceedings. 

If you're asking about a lease agreement template that you're using, and if it's beneficial to keep, that I'm not completely sure on. 

I do know that in some cases subordination is required, like a second mortgage lender requiring that the first mortgage loan become subordinate to the new mortgage, as a prerequisite to approval of the new loan. 

But as far as its requirement or benefit to being in a lease agreement, I too am curious of the answer. 

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  • Nathan FisherBusiness Member
    Property Manager · Cleveland, OH · Member since 2020 · 312 posts · 265 votes
    3y
    NAL, But it's a pretty standard clause in most leases. If your lawyer added it. You need it. 
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  • Ryan Lesley
    Real Estate Agent · Fort Collins, CO · Member since 2023 · 171 posts · 116 votes
    3y

    Hey Christopher, 

    I'm sure others can shed more detail on the subject, but my understanding is that as far as its purpose: it's disclosing that the lease will rank last to be reconciled, in realation to other liens/ property rights, should there be dispute or collection proceedings. 

    If you're asking about a lease agreement template that you're using, and if it's beneficial to keep, that I'm not completely sure on. 

    I do know that in some cases subordination is required, like a second mortgage lender requiring that the first mortgage loan become subordinate to the new mortgage, as a prerequisite to approval of the new loan. 

    But as far as its requirement or benefit to being in a lease agreement, I too am curious of the answer. 

    1Reply
  • Christopher VeljkovicPro Member
    OP
    Rental Property Investor · Morris County, NJ · Member since 2017 · 130 posts · 35 votes
    3y

    @Nathan Fisher your right, my attorney did put it in but I never questioned it until today.

    @Ryan Lesley I pretty much had thought the same thing but needed some clarification.  TY for concurring.  

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  • Ryan Lesley
    Real Estate Agent · Fort Collins, CO · Member since 2023 · 171 posts · 116 votes
    3y

    @Christopher Veljkovic, yea it sounds like maybe it's a requirement by the state, I did a little research out of curiosity and while I didn't really find anything specific it seemed like a typical clause like Nathan mentioned. 

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