Subordination Clause
Explicit language stating which lien or interest is subordinate, the scope of subordinated rights, and any conditions or exceptions to the subordination.
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Subordination and Attornment Agreement
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What a Subordination and Attornment Agreement Is
Why This Agreement Matters for Priority and Possession
It creates a clear legal record that protects lenders’ security interests and tenants’ rights by fixing lien priority and confirming who the tenant will recognize as landlord after a sale, foreclosure, or refinancing.
Who Normally Signs or Relies on This Agreement
Typical parties include landlords, tenants, lenders, and purchasers; each party’s role is different but mutually relevant for lien priority and occupancy rights.
- Lenders and mortgagees seeking to preserve or obtain lien priority while allowing existing leases to remain in effect.
- Landlords or property owners who must confirm tenant obligations after refinancing or sale.
- Tenants who need assurance their lease will continue under a new lender or owner.
The agreement reduces litigation risk by documenting priorities and post-transfer tenancy relationships ahead of title transfers or loan closings.
Representative Signers and Authorized Roles
Lender / Secured Creditor
Chief legal or loan officer who holds authority to accept subordinate interests or require attornment; signs to confirm priority changes and may require board or loan committee approval before execution.
Tenant / Authorized Agent
Property occupant or an authorized representative who attorns to a new landlord; must have authority under lease terms and sign acknowledging continued performance obligations and where rent should be paid following a transfer.
Core Elements Included in a Professional Agreement
Attornment Clause
Tenant acknowledgement that it will recognize a new landlord or secured party and continue performance under existing lease terms unless expressly modified.
Effective Date
Specifies when the subordination and attornment take effect, often tied to closing, recording, or a triggering event such as a foreclosure sale.
Priority Statement
Defines lien ranking relative to other recorded instruments and may reference recording instruments or loan documents by date and recording information.
Cure and Remedies
Sets out rights to notice, opportunity to cure defaults, enforcement measures, and which remedies survive termination or transfer.
Governing Law
Identifies the state law that governs interpretation and enforcement, frequently the state where the property is located.
How to Complete the Agreement, Step by Step
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01Gather Documents: Collect leases, mortgage, and recorded instruments for reference.
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02Draft Agreement: Populate parties, property, priority language, and effective date.
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03Review with Counsel: Have lender and tenant counsel confirm language and authority.
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04Execute and Record: Sign, notarize, then record if required to preserve priority.
Where the Agreement Fits in a Typical Transaction
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Pre-Closing Review: Title and loan counsel confirm existing encumbrances.
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Execution: Parties sign in the order required by loan documents.
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Notarization: Notary acknowledges signatures per state rules.
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Recording / Notice: Record with county clerk or provide notice to tenants.
Configuring an Online Signing Workflow
| Field | Configuration |
|---|---|
| Signer Order | Lender then landlord then tenant |
| Required Fields | Property, parties, effective date, notarization |
| Authentication | Email plus SMS or knowledge-based auth |
| Audit Trail | Capture timestamps, IP, and completion certificate |
Digital Signing and Technical Requirements
Use an eSignature platform that supports ordered signing, notarization workflows, secure storage, and a detailed audit trail.
- File Formats: PDF, DOCX supported
- Integrations: Title systems, CRM, cloud storage
- Security: TLS in transit; AES-256 at rest
Ensure the platform can attach a certificate of completion, store notarized copies, and meet any industry compliance such as a BAA for healthcare-adjacent workflows.
Common Legal Risks and Consequences
Loss of Priority:
Improper or unrecorded subordination may forfeit expected lien priority.
Invalid Attornment:
Defective attornment language can leave tenant obligations unclear.
Recording Defect:
Missing acknowledgements can prevent county recording.
Enforcement Issues:
Ambiguities increase litigation and collection costs.
Contractual Breach:
Conflicting clauses may trigger loan defaults or cure obligations.
Title Problems:
Inaccurate references can create clouded title requiring quiet title actions.
Frequent Preparation Errors to Avoid
- Using informal property descriptions rather than the recorded legal description leads to recording rejection or ambiguity.
- Failing to confirm that the signer has corporate authority or a board resolution to bind an entity creates enforceability risk.
- Not tying the effective date to the closing or triggering event can create gaps in priority between documents.
- Omitting recording or failing to provide notice to tenants leaves public records inconsistent with private agreements.
Real-World Use Cases and Outcomes
Commercial Refinance
A lender required subordination to take first priority on refinancing older debts
- Tenant attorned to the lender to ensure uninterrupted occupancy
- The recorded agreement prevented a later title dispute and allowed the refinance to close on schedule, preserving rental income streams.
Loan Default Sale
A bank foreclosed and purchased property at sale, prompting tenants to question whom to pay
- An attornment confirmed landlord status and rent direction
- With attornment in place, rent payments were properly routed, and tenant eviction risk from confusion was avoided.
eSignature Vendor Comparison for Executing This Agreement
| signNow | DocuSign | Adobe Sign | PandaDoc | HelloSign | |
|---|---|---|---|---|---|
| Starting Price | $8/user/mo | $15/user/mo | $14/user/mo | $19/user/mo | $15/user/mo |
| Free Trial | 7-day free trial | Varies | Varies | Varies | Varies |
| Bulk Send | Yes | Yes | Yes | Yes | Yes |
| Audit Trail | Yes | Yes | Yes | Yes | Yes |
| HIPAA Compliant | Yes | Yes | Yes | No | No |
Frequently Asked Questions About These Agreements
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Is an electronic signature valid here?
Yes. Electronic signatures are legally enforceable under the ESIGN Act (15 U.S.C. ch. 96) and UETA in most states, provided intent and consent are established and records can be retained.
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When is notarization required?
Notarization is required by many counties for recordation of documents affecting title; use your county recorder’s rules and a notary or RON workflow if permitted by state law.
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Can a tenant revoke attornment?
Attornment is a contractual acknowledgement; revocation depends on contract terms and applicable law and may require agreement of the other parties or a court order to alter priority.
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What happens if the agreement isn’t recorded?
Failure to record can impair the intended priority against subsequent bona fide purchasers or lienholders and may require quiet title litigation to resolve.
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Who must sign for an entity?
An authorized officer or agent with corporate authority must sign and, where applicable, provide a board resolution or power of attorney to demonstrate signing authority.
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How do I correct a mistake after execution?
Errors are typically corrected by executing a corrective amendment or restatement agreed by all parties and re-recording if required to preserve public notice and priority.
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