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Subordination Agreement

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AGREEMENT TO RETIRE SUBORDINATED DEBT

This Agreement is made and entered into this the day of

by and between a General Partnership

("Borrower"), (" "), and a Corporation ("Lender").

WITNESSETH:

WHEREAS, in connection with Loan No. from to , said Borrower and Lender did execute a Promissory Note ("Note") in favor of Beneficiary, dated , in the principal amount of ($ ); and

WHEREAS, said Note is secured in part by that certain Deed of Trust and Security Agreement ("Deed of Trust") by and between Borrower and Lender, dated and filed of record in Book at page of the land records of the office of the Chancery Clerk of County, Mississippi; and

WHEREAS, said Note is also secured by that certain Credit Support Agreement by and between Borrower and Lender, dated a copy of which is attached as Exhibit "D" to said Deed of Trust; and

WHEREAS, Borrower and Lender did execute a Loan Agreement dated a copy of which Loan Agreement (without Exhibits or Appendices) is attached as Exhibit "C" to said Deed of Trust; and

WHEREAS, the Partners of and have requested Beneficiary to consent to a transaction pursuant to which and corporations, would purchase the interest of

in , and have requested that the Loan Agreement be modified; and

WHEREAS, Lender has agreed to the modification of said Loan Agreement provided Borrower and agree to cause the retirement of the Subordinated Debt as defined in said Loan Agreement, as modified;

NOW, THEREFORE, for and in consideration of the mutual covenants and promises of the parties herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, and Lender hereby covenant and agree as follows:

1. agrees that, on or prior to , (a) he will infuse or cause to be infused sufficient cash into Borrower to enable Borrower to, and he will cause Borrower to, pay off and satisfy the Subordinated Debt, as defined in said Loan Agreement, without using any Assets of Borrower other than the infused cash, or (b) that he will otherwise cause the Subordinated Debt to be satisfied outside of Borrower and removed as a Liability (as defined in said Loan Agreement) of Borrower.

2. This Agreement shall constitute a Security Document as defined by said Loan Agreement, and any breach of this Agreement by Borrower or shall constitute an Event of Default as defined in said Loan Agreement.

3. In addition to the termination provisions of Section 7 of said Credit Support Agreement, said Agreement shall also immediately terminate under the following conditions:

a) The Subordinated Debt, as defined in said Loan Agreement, has been satisfied in accordance with Paragraph 1 above and is no longer a Liability (as defined in said Loan Agreement) of Borrower;

b) Borrower's Net Worth (as defined in the Loan Agreement) exceeds $ ; and

c) Borrower is not in default in the terms of any Security Document (as defined in said Loan Agreement), and all payments required by said Loan Agreement are current.

This Agreement shall be binding upon, and inure to the benefit of, the respective successors and assigns of the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.

By:

A General Partnership

By:

General Partner

By:

President

By:

General Partner

By:

President

Individually

STATE OF

COUNTY OF

Personally appeared before me, the undersigned authority in and for the said County and State, on this day of , within my jurisdiction, the within-named , who acknowledged that he is of , a Corporation, and that for and on behalf of said Corporation, and as its act and deed, he executed the above and foregoing instrument, after first having been duly authorized by said Corporation so to do.


Notary Public

My Commission Expires:

STATE OF MISSISSIPPI

COUNTY OF

Personally appeared before me, the undersigned authority in and for the said County and State, on this day of , within my jurisdiction, the within-named , who acknowledged that he is President of , a Corporation, one of the General Partners of a General Partnership, and that for and on behalf of the said Corporation and said Partnership, and as the act and deed of said Corporation and said Partnership, he executed the above and foregoing instrument, after first having been duly authorized by said Corporation and by said Partnership so to do.


Notary Public

My Commission Expires:

STATE OF MISSISSIPPI

COUNTY OF

Personally appeared before me, the undersigned authority in and for the said County and State, on this day of , within my jurisdiction, the within-named , who acknowledged that he is President of , a Corporation, one of the General Partners of a General Partnership, and that for and on behalf of the said Corporation and said Partnership, and as the act and deed of said Corporation and said Partnership, he executed the above and foregoing instrument, after first having been duly authorized by said Corporation and by said Partnership so to do.


Notary Public

My Commission Expires:

STATE OF MISSISSIPPI

COUNTY OF

Personally appeared before me, the undersigned authority in and for the said County and State, on this day of , within my jurisdiction, the within-named , who acknowledged that he executed the above and foregoing instrument.


Notary Public

My Commission Expires:

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What a Subordination Agreement Does and when it’s used

A Subordination Agreement is a written contract in which one creditor agrees that its lien, mortgage, or security interest will be ranked behind another lienholder for priority purposes. Typically used in real estate and loan restructurings, it clarifies which lender has first claim on collateral when multiple liens exist. The document identifies the senior and junior lienholders, references the instrument being subordinated, states the effective date, and records any lender consents or conditions. Subordination Agreements can be executed on paper or electronically under 15 U.S.C. ch. 96 (ESIGN) and state UETA statutes.

Why a Subordination Agreement matters in financings

A clear Subordination Agreement avoids disputes about lien priority, enables refinancing or mezzanine financing, and documents lender consents that underlie closings and title insurance. It reduces closing delays and provides an auditable record of priority changes.

Why a Subordination Agreement matters in financings

Who typically prepares and signs a Subordination Agreement

The document involves lenders, the borrower, and often closing or title professionals who manage recording and consent checks.

  • Senior and junior lenders — Negotiate terms, provide written consent, and sign to establish priority and enforceability.
  • Borrowers / property owners — Supply loan references and property legal description; coordinate execution and recording.
  • Title companies and closing attorneys — Review priority effects, verify recording requirements, and confirm title insurance endorsements.

In many transactions title insurers or counsel will review the executed agreement before closing to confirm the new priority is acceptable.

Core elements to include in a professional Subordination Agreement

A well-drafted Subordination Agreement contains standard clauses to make intent and effect clear, identify the encumbered collateral, and eliminate ambiguity about priority and recording.

Parties

Full legal names for senior lender, junior lender, and borrower with entity types and addresses; accurate naming prevents enforceability disputes.

Recitals

Concise background stating the original instruments (dates, book/page or recording numbers) so the subordinated lien is unmistakably identified.

Subordination Clause

Express language that the junior lienholder's interest is subordinated to the senior lienholder's interest, including scope and limits of subordination.

Effective Date and Conditions

Specify the effective date and any conditions precedent (e.g., payoff, payment schedule, escrow instructions, or interim waivers).

Recording and Notice

State who will record, where to record (county), and whether recording or filing is required for priority change to bind third parties.

Signatures and Notary

Execution blocks for authorized signers, corporate officer lines, and notary acknowledgment or RON language if notarization is required.

Security, compliance, and record integrity

Encryption: AES-256 at rest; TLS 1.2/1.3 in transit
Audit Trail: Full timestamped signing history
Authentication: Email, SMS, KBA, or advanced methods
Regulatory Certs: SOC 2 Type II and ISO 27001
Legal Standards: ESIGN and UETA compliance
Healthcare Ready: HIPAA-compliant with BAA available

Step-by-step: completing a Subordination Agreement

Follow these sequential steps to prepare, execute, and file a Subordination Agreement with minimal risk of defects.

  • 01
    Gather documents: Collect recorded mortgage, loan number, deed, and title report references.
  • 02
    Draft agreement: Complete parties, recitals, subordination clause, and effective date.
  • 03
    Obtain consents: Senior lender and any necessary lienholders sign and provide written consent.
  • 04
    Execute and record: Notarize if required, then record in the county recorder’s office.

Typical online workflow settings for e-submitting a Subordination Agreement

Configure your e-signature workflow to match legal and title requirements before sending the document for signatures.

Field Configuration
Authentication Method Email + SMS OTP or KBA for lender-level verification
Notary / RON Enable Remote Online Notarization where allowed; capture A/V record
Routing Order Set senior lender to sign before junior lender when required
File Format Use PDF/A or flattened PDF for archiving and recording

Process overview: from upload to recorded priority

A streamlined online process reduces delays; the diagram below follows common stages used by title and closing teams.

  • Upload document: Add the drafted Subordination Agreement to the signing platform.
  • Place fields: Add signature, date, and notary fields where required.
  • Invite signers: Send signing links in the correct routing order.
  • Finalize and record: Capture audit trail, download executed PDF, then record with county as needed.

Digital signing considerations and platform requirements

Ensure the eSignature platform supports required authentication, audit trails, and notarization workflows before sending for execution.

  • Authentication options: Email, SMS, knowledge-based authentication, or certificate-based methods
  • Integrations & formats: Supports PDF, DOCX, Google Drive, NetSuite, Salesforce integrations
  • Notary & RON: Ability to record RON session, attach notary acknowledgment, and export A/V transcript

Confirm platform retention and export features so executed agreements and audit trails are retrievable for title underwriting and future audits.

Practical tips to avoid delays and disputes

Adopt these practices to reduce execution errors and ensure the subordination is effective for title and lending purposes.

Verify recorded references before drafting
Confirm book/page or instrument numbers, legal description, and exact borrower name against the county recorder’s records and title report to avoid mismatches that invalidate recording or delay underwriting.
Match corporate authority and signatures
Obtain corporate resolutions or officer certificates for entities, and ensure signers have authority; failing to document authority can lead to insurer objections or litigation.
Coordinate recording responsibility
Agree in writing which party will record the executed agreement and by when; clarify who pays recording fees to prevent disputes over priority and title endorsements.
Use notarization or RON where required
When a notary acknowledgement is expected by the recorder or title company, use an in-person notary or a permitted RON process and retain the notary record as proof of execution.

Common mistakes that cause rejections or title insurer objections

  • Incorrect party names or missing 'Inc./LLC' suffixes leading to mismatch with recorded instruments and insurer exceptions.
  • Using a street address only instead of the full legal property description, causing the county recorder to reject or mis-index the filing.
  • Failing to obtain or attach senior lender consent or payoff conditions, which can prevent title endorsement for refinancing.
  • Notarization errors or absence of required witness attestations, prompting recorder or insurer to treat the document as defective.

Key risks from improper or missing subordination documentation

Loss of Priority: Junior lien may be treated as senior or ineffective
Recording Rejection: County may refuse to record defective instrument
Title Exceptions: Title insurer may exclude coverage or deny endorsement
Contractual Liability: Indemnity claims between borrower and lenders
Closing Delays: Undisclosed defects can postpone funding
Increased Costs: Additional filings, attorney time, or corrective instruments

Timing and turnaround expectations

Plan timelines around lender review, notarization, and county recording cycles to avoid closing interruptions.

Document Preparation Time:

Allow 1–3 business days for lender review and redlines before execution

Signature Collection:

Allow 24–72 hours for remote signing, longer if notarization or board approvals required

Recording Processing:

County recording can take same day to several weeks depending on jurisdiction and submission method

Title Insurance Endorsement:

Insurer review and endorsement typically takes 2–10 business days after receipt of executed agreement

Retention of Records:

Store final executed copy and audit trail immediately after recording for underwriting and audits

eSignature vendor pricing and capability snapshot for signing Subordination Agreements

Compare typical starting prices and capability checkboxes for common eSignature vendors; signNow appears first to align with platform-comparison conventions.

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 by plan Varies by plan Varies by plan Varies by plan
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No
Envelope Cap No cap 100 envelopes/user/year Varies Varies Varies

FAQs: common execution and enforceability questions

Answers to frequent questions about e-signing, notarization, recording, and what to do when a lender will not agree to subordinate.


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