What is Subordination Agreement?
A legal document establishing the priority of a mortgage over a lease, typically paired with non-disturbance protections for the tenant.
Definition
A subordination agreement is a legal document that establishes the priority of one interest over another — most commonly, the priority of a lender's mortgage over a tenant's lease. When a landlord finances or refinances a property, the lender typically requires tenants to subordinate their leases to the new mortgage, meaning the mortgage takes priority in the event of default and foreclosure. Subordination agreements are usually paired with non-disturbance protections (forming the SNDA) to assure tenants their leases will survive a foreclosure. From a CAM perspective, subordination agreements matter during ownership transitions because they affect whether existing CAM terms, prepaid estimates, and reconciliation obligations remain enforceable under new ownership. Property controllers should verify that CAM provisions are preserved when subordination agreements are executed.
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