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A Subordination Agreement establishes the priority order between different creditors who have claims on the same asset. In India, banks and financial institutions commonly use these agreements when multiple lenders are involved in financing a property or business asset.

Under these agreements, a senior creditor gets repayment priority over junior creditors if the borrower defaults. For example, if you're refinancing your home loan, your new lender might require existing lenders to sign a Subordination Agreement, ensuring the new loan takes first position. These arrangements play a crucial role in Indian secured lending practices and are enforceable under the Transfer of Property Act, 1882.

Use a Subordination Agreement when you need to rearrange the priority of debts secured against the same asset. This comes up most often during loan refinancing, especially when seeking better interest rates from a new lender who needs first-position security rights.

These agreements become essential during property development projects in India where multiple lenders provide construction finance, or in business restructuring when new investors require priority over existing creditors. The Reserve Bank of India recognizes these arrangements for debt restructuring, making them particularly valuable for managing complex financing arrangements and protecting lender interests in secured transactions.

• Bank Subordination Agreement: Used between financial institutions to establish repayment priorities, commonly in syndicated loans or refinancing scenarios
• Landlord Lien Subordination Agreement: Specifically addresses property-related claims between landlords and lenders, protecting tenant assets used as collateral
• Lien Subordination Agreement: General-purpose agreement for managing multiple security interests against the same asset
• Attornment Agreement: Combines subordination with tenant recognition of a new property owner's rights
• Attornment And Non Disturbance Agreement: Adds tenant protection clauses ensuring lease continuation despite property foreclosure

• Senior Lenders: Usually banks or financial institutions who require first-position security rights, typically when providing new loans or refinancing
• Junior Creditors: Existing lenders who agree to subordinate their claims, often smaller financial institutions or private lenders
• Corporate Borrowers: Companies seeking multiple rounds of financing while managing creditor priorities
• Legal Counsel: Lawyers who draft and review these agreements to ensure compliance with RBI guidelines and banking regulations
• Property Developers: Entities managing multiple construction loans who need to establish clear repayment hierarchies
• Company Directors: Who execute these agreements on behalf of borrowing entities after board approval

• Asset Details: Collect complete information about the property or asset being used as security, including registration numbers and encumbrance certificates
• Existing Loans: Gather documentation of all current loans secured against the asset, including loan amounts and security interests
• Lender Information: Document full legal names and contact details of all creditors involved, both senior and junior
• Priority Structure: Clearly outline the agreed ranking of security interests and repayment order
• Board Approvals: Obtain necessary corporate authorizations and resolutions from all involved parties
• Automated Drafting: Use our platform to generate a legally-compliant agreement that includes all mandatory elements under Indian law

• Parties and Recitals: Full legal names, addresses, and roles of all creditors and debtors involved
• Asset Description: Detailed identification of the secured property or assets, including registration details
• Priority Terms: Clear statement of debt rankings and how future advances will be treated
• Default Provisions: Specific actions permitted when borrower defaults, including enforcement rights
• Representations: Warranties about existing security interests and authority to enter agreement
• Notice Requirements: Procedures for communication between creditors about defaults or enforcement
• Governing Law: Explicit reference to Indian law and jurisdiction for dispute resolution
• Execution Block: Proper signature spaces with company seals for all parties

People often confuse a Subordination Agreement with an Assignment Agreement, but they serve distinct purposes in Indian financial transactions. While both deal with rights over assets, they operate quite differently in practice.

• Transfer of Rights: Assignment Agreements completely transfer rights from one party to another, while Subordination Agreements only rearrange the priority of existing rights without transferring them
• Parties Involved: Subordination involves multiple creditors establishing a hierarchy, whereas Assignment typically involves just two parties - an assignor and assignee
• Timing and Duration: Assignments are usually one-time transfers, while Subordination Agreements remain active as long as multiple debts exist
• Legal Framework: Assignments fall under the Transfer of Property Act's general provisions, while Subordination Agreements are specifically recognized under Indian banking regulations for debt restructuring