Subordination Agreement

A subordination agreement in real estate is a legal contract that changes the priority of liens or claims on a property. Typically, it involves a situation where a property owner seeks additional financing or refinancing and the new lender requires their lien to be prioritized over existing liens. In such cases, the existing creditor consents to subordinate their lien, meaning they agree to have their interest in the property ranked behind that of the new lender in terms of priority for repayment in case of foreclosure or sale.

In Virginia, subordination agreements are typically governed by general contract law principles and are subject to applicable real estate statutes. While there may not be specific statutes in Virginia addressing subordination agreements in real estate transactions, the Virginia Code outlines procedures for the recordation of deeds, mortgages, and other real estate documents, which may include subordination agreements.

Parties entering into subordination agreements in Virginia should ensure that the agreement complies with applicable laws and protects their interests. Consulting with legal professionals experienced in real estate transactions can help parties understand the implications of subordination agreements and navigate the process effectively.