A Subordination Agreement of Lease provides consent from a tenant that their right to
enjoy possession of the property is lower ("subordinate") in priority than the rights of a
bank holding a mortgage on the leased property. If the property owner defaults on their
mortgage payments, this document allows the lender to foreclose on the property and
terminate the tenant’s lease. This Agreement can be used by property owners or
lenders that want to obtain tenant consent to subordinate their rights to enjoy the
property in case of default.
SUBORDINATION AGREEMENT LEASE
THIS AGREEMENT is made as of __________________ [Comment: insert date] by and
between _______________, located at ________________ (hereinafter “Owner”),
_______________, located at ________________ (hereinafter “Tenant”), and
_______________, located at ________________ (hereinafter “Lender”).
WHEREAS the Tenant has executed a lease (“Lease”) with the Owner on ________ [Comment:
insert date] of a portion of the building located at ________, more particularly described in
Exhibit A attached to this agreement (“Property”).
WHEREAS the Owner is executing a mortgage of the Property in favour of Lender. Such
mortgage is dated ____________, secures a sum of $______ and is to be recorded in the records,
County Clerk of ___________ (“Mortgage”).
WHEREAS, Tenant desires to be assured of the continued use and occupancy of the Property
under the terms of said Lease, and
WHEREAS, Lender agrees to such continued use and occupancy by Tenant provided that Tenant
agrees to recognize an attorn to Lender or the purchaser in the event of foreclosure or otherwise.
NOW, THEREFORE, in consideration of the premises and the sum of $_______ [$1.00] by each
party in hand paid to the other, receipt of which is hereby acknowledged, it is hereby mutually
covenanted and agreed as follows:
In consideration of the loan to be made by Lender to Owner and for other good and valuable
consideration to the parties, as contained in this Agreement, Tenant and Owner agree that the
Lease, and all rights under the Lease, are subject, inferior and subordinate to the Mortgage and
the lien thereof (including all extensions and modifications of the Mortgage). This provision is
self-operative, but Tenant will deliver any additional instruments required of Tenant to effect
If Lender, or a purchaser on foreclosure or conveyance in lieu of foreclosure or otherwise,
succeeds to Owner's interest in the Property and, at such time, the Lease is in full force, then
Tenant will promptly, on request, it will attorn to the Lender or to purchaser of such foreclosure
sale and recognize such purchaser as the landlord under said lease.
If Tenant is not in default under the lease or the terms of this Agreement, then Lender will not (a)
name or join Tenant as a party defendant in any action to foreclose the Mortgage or otherwise act
to extinguish the Lease or Tenant's interest under the Lease or (b) disturb Tenant's possession
under the Lease. Tenant's rights under the Lease shall not be disturbed in any such foreclosure,
and any sale in foreclosure shall be made subject to such Lease. Accordingly, from and after
such event, the successor landlord and Tenant shall have the same remedies against each other
for the breach of an agreement contained in the Lease as Tenant and Owner had before successor
landlord /Lender succeeded to the interest of the Owner; provided, however, that successor
landlord/Lender shall not be:
A. liable for any act or omission of any prior landlord (including Owner); or
B. subject to any offsets or defenses that Tenant might have against any prior landlord
(including Owner); or
C. bound by any rent or additional rent that Tenant might have paid for more than one
month in advance to any prior landlord (including Owner); or
D. bound by any amendment or modification of the Lease made after the date of this
Agreement without Lender's prior written consent; or
E. liable for return of any security deposit.
Neither Owner nor Tenant will, without Lender's written consent, do the following:
A. Terminate the Lease or accept a surrender of it except (i) after default by Tenant and
failure to cure or, in the case of a surrender of the Lease, prior notice of intended
termination being given to Lender or (ii) otherwise in accord with the terms of the Lease;
B. Subordinate or permit subordination of the Lease to any lien that is subordinate to the
[Comment: insert any additional restrictions]
Any such action without Lender's consent is void as against Lender.
To the best of Tenant's knowledge, there does not exist any default, claim, controversy or dispute
under the Lease. Tenant has not commenced any action nor sent or received any notice to terminate
6. Notice to Lender.
Tenant agrees that it will deliver to Lender a copy of all notices of default or termination received
by it under the terms of the Lease.
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If any portion of this Agreement is held invalid or inoperative, then all of the remaining portions
will remain in full force and effect, and, so far as is reasonable and possible, effect will be given to
the intent manifested by the portion or portions held to be invalid or inoperative.
8. Governing Law.
This Agreement will be governed by and construed in accordance with the laws of the State where
the Property is located.
A. All notices, demands and other communications ("Notices") under or concerning this
Agreement must be in writing. Each Notice shall be addressed to the intended recipient
at its address set forth in this Agreement, and will be deemed given on the earliest to
occur of (1) the date when the Notice is received by the addressee; (2) the first Business
Day after the Notice is delivered to a recognized overnight courier service, with
arrangements made for payment of charges for next Business Day delivery; or (3) the
third Business Day after the Notice is deposited in the United States mail with postage
prepaid, certified mail, return receipt requested. The term "Business Day" means any day
other than a Saturday, a Sunday or any other day on which Lender is not open for
B. Any party to this Agreement may change the address to which Notices intended for it are
to be directed by means of Notice given to the other party in accordance with this
Section. Each party agrees that it will not refuse or reject delivery of any Notice given in
accordance with this Section, that it will acknowledge, in writing, the receipt of any
Notice upon request by the other party and that any Notice rejected or refused by it will
be deemed for purposes of this Section to have been received by the rejecting party on the
date so refused or rejected, as conclusively established by the records of the U.S. Postal
Service or the courier service.
Any Notice, if given to Lender, must be addressed as follows:
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Any Notice, if given to Tenant, must be addressed as follows:
10. Successors and Assigns.
This Agreement will be binding upon and inure to the benefit of the parties to this Agreement and
their respective heirs, legal representatives, successors, successors-in-title and assigns.
This Agreement may be executed in any number of counterparts, all of which when taken together
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement [under seal] as of the
date first above written.
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