Landlord Tenant Subordination Law & Legal Definition
A subordination agreement is a written contract in which a lender who has secured a loan by a mortgage or deed of trust agrees with the property owner to subordinate the first loan to a new loan. Therefore, in the case of foreclosure, the new loan has priority to be paid ahead of the old loan. The agreement must be notarized and recorded county recorder's office.
Almost without exception, shopping center leases contain subordination provisions stating that the rights of the tenants under the leases will be subject to the rights of any lender whose mortgage affects the shopping center.Generally, if the lease is recorded, or if the tenant takes possession of the premises prior to the recordation of a mortgage on the property of which the leased premises is a part, the lien of the lease has "priority" over the lien of the mortgage.
A subordination provision changes the priority: The tenant agrees that the lien of its lease will be subordinate to the lien of a mortgage. A landlord generally includes subordination language in its lease in anticipation of the requirement of its lenders.
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