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Subordination Agreement Mortgage for Australia

Subordination Agreement Mortgage Template for Australia

This document is a legally binding agreement governed by Australian law that establishes the priority and subordination arrangements between multiple lenders holding mortgage security over the same property. It sets out the respective rights and obligations of senior and subordinate lenders, including payment priorities, enforcement rights, and restrictions on the subordinate lender's actions. The agreement ensures clarity in the ranking of security interests and helps prevent disputes between lenders, particularly in enforcement scenarios. It complies with Australian property law requirements and is typically registered on title where required by state legislation.

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What is a Subordination Agreement Mortgage?

A Subordination Agreement Mortgage is essential in situations where multiple lenders hold security interests over the same property and need to establish clear priority rankings. This document type is commonly used in Australian financing arrangements where a borrower has multiple credit facilities secured against the same asset, or in refinancing situations where existing security interests need to be subordinated to new lending. The agreement complies with Australian federal and state-based property and securities legislation, ensuring enforceability across jurisdictions. It includes crucial details about the secured property, existing mortgages, payment priorities, and enforcement rights. This type of agreement is particularly important in commercial real estate financing, property development, and complex corporate lending structures where multiple layers of debt exist.

What sections should be included in a Subordination Agreement Mortgage?

1. Parties: Identifies all parties to the agreement including senior lender, subordinate lender(s), and borrower

2. Background: Recitals explaining the context of existing mortgages, reason for subordination, and current security arrangements

3. Definitions and Interpretation: Defines key terms and establishes interpretation principles

4. Agreement to Subordinate: Core provision establishing the subordination arrangement and priority of securities

5. Representations and Warranties: Statements of fact and assurances from each party regarding their capacity and authority

6. Priority of Payments: Sets out the order in which payments will be made and how proceeds will be distributed

7. Restrictions on Subordinate Lender: Limitations on subordinate lender's rights to take enforcement action or receive payments

8. Senior Lender's Rights: Details the senior lender's rights regarding enforcement, amendment of senior debt, and other key powers

9. Duration and Termination: Specifies how long the subordination remains in effect and circumstances for termination

10. General Provisions: Standard boilerplate clauses including notices, governing law, jurisdiction, and amendments

What sections are optional to include in a Subordination Agreement Mortgage?

1. Cross-Default Provisions: Used when parties want to specify how defaults under one facility affect rights under others

2. Additional Advance Provisions: Include when the senior lender may make additional advances that will maintain priority

3. Standstill Provisions: Detailed provisions regarding timing and circumstances when subordinate lender must refrain from taking action

4. Inter-creditor Provisions: Required when there are multiple subordinate lenders or complex creditor arrangements

5. Security Trustee Provisions: Include when a security trustee is involved in holding or managing the security

6. Assignment and Transfer: Detailed provisions for when rights under the agreement can be assigned or transferred

What schedules should be included in a Subordination Agreement Mortgage?

1. Schedule 1 - Existing Securities: Details of all existing mortgages and security interests including registration numbers

2. Schedule 2 - Property Details: Legal description and details of all properties subject to the security interests

3. Schedule 3 - Senior Facility Documents: List and details of all documents comprising the senior facility

4. Schedule 4 - Subordinate Facility Documents: List and details of all documents comprising the subordinate facility

5. Schedule 5 - Form of Notice: Prescribed form for any notices required under the agreement

6. Appendix A - Priority Payment Waterfall: Detailed breakdown of payment priorities and distributions in various scenarios

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok˰ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Australia

Publisher

tiktok˰

Document Type

Agreement Contract

Cost

Free to use
Relevant legal definitions
































Clauses



































Relevant Industries

Banking & Finance

Real Estate

Construction

Property Development

Infrastructure

Commercial Property

Residential Property

Financial Services

Investment

Mortgage Lending

Relevant Teams

Legal

Credit Risk

Real Estate

Commercial Lending

Property Finance

Mortgage Operations

Compliance

Security Administration

Portfolio Management

Transaction Management

Relevant Roles

Legal Counsel

Property Lawyer

Banking & Finance Lawyer

Real Estate Manager

Credit Manager

Mortgage Officer

Risk Manager

Commercial Lending Officer

Property Finance Manager

Loan Officer

Security Trustee Officer

Compliance Officer

Senior Credit Analyst

Portfolio Manager

Transaction Manager

Industries








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