STG Subordination Agreement – Subcontractor Priority Agreement

NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.
 

STG Subordination Agreement – Subcontractor Priority Agreement

          WHEREAS ______________________________________, (“Owner”), is the owner of the following real property (“Land”) _______County, __________, to-wit:

See Exhibit A attached hereto.

          WHEREAS, Owner proposes to construct improvements on the Land and has agreed, or intends to enter into an agreement with _________________________, as a “General Contractor” to retain subcontractors as agent of Owner, incidental to said construction;

          WHEREAS, each undersigned subcontractor has agreed, or intends to enter into an agreement with Owner or General Contractor to furnish materials, to perform labor or to retain other persons or material suppliers incidental to said construction, for which the undersigned may have a statutory lien;

          WHEREAS, Owner proposes to obtain a loan that will provide financing for the described construction on the Land, and Owner has executed, or will execute a deed of trust (“the mortgage”) in favor of ____________________________, or an alternative, substitute lender (“Mortgage Company”) to secure the payment of that loan. The mortgage has been, or will be, recorded as a lien upon the described Land of the Owner.

          WHEREAS, Mortgage Company has applied to Stewart Title Guaranty Company, (hereinafter called “Title Company”) for a policy of title insurance insuring the priority of the lien of the mortgage.

          WHEREAS, Title Company is unwilling to insure the lien priority of the Mortgage Company unless certain subcontractors (referenced herein as “Subcontractor” and “Subordinator”) agree to unconditionally subordinate the statutory lien rights provided by ________________ that secure payment for labor and materials furnished for the described construction of improvements on the Land, such that the lien of the Mortgage Company is prior to the lien rights of such undersigned Subcontractor;

          AND WHEREAS, each Subcontractor who signs this Subordination Agreement independently intends by this document to induce the Title Company to issue a title insurance policy insuring the Mortgage Company against all claims of statutory lien rights by each Subordinator, and to induce the Mortgage Company to provide the described loan.

          NOW, THEREFORE, Subordinator agrees that the lien of the above mortgage shall be and at all times remain prior, paramount and superior to any statutory right of lien upon the Land that Subordinator may now have or hereafter acquire, due to any improvements on said Land performed by Subordinator, or performed by any other persons or material suppliers at the request of Subordinator.

          Subordinator agrees that the Title Company may directly enforce the provisions of this Priority Agreement against each Subordinator separately, in order to protect against its liability to the Mortgage Company resulting from the title insurance policy.

          Subordinator acknowledges that Title Company is not obligated to obtain subordination agreements by all possible subcontractors. Subordinator acknowledges that this is intended to be effective to subordinate the lien of Subordinator, even though other subcontractors are not subordinated.

          This Subordination Agreement may be further relied upon by the Owner, the Mortgage Company or the Title Company at any time in the future, if the Mortgage Company increases the loan amount secured by the mortgage, or if the present Mortgage Company or a new mortgage company provide new financing secured by a new mortgage loan, if the new financing pays for the release of the present mortgage and is secured by a new mortgage. The lien of the present mortgage in the event of an increased loan, or the lien of a refinance new mortgage, shall also be prior, paramount and superior to any statutory right of lien that Subordinator may now have or hereafter acquire.

          Subordinator agrees that Title Company and Mortgage Company have no obligation to Subordinator to advance any funds or to supervise the application of funds advanced to Owner, and any application or use of such funds for purposes other than for payment of the described construction shall not defeat the subordination of the statutory lien rights in whole or in part.

          However, nothing within this Subordination Agreement shall be construed to alter the right of Subordinator to claim a statutory lien upon the Land, or the right of Subordinator to enforce a statutory lien against the Owner. Further, nothing in this Priority Agreement shall be construed to alter the right of Subordinator to provide notification to the Mortgage Company pursuant to _______________________ (which may require a construction loan lender to withhold from future construction draws, subject to statutory conditions, and provides limited remedies against the priority of funds for subsequent draws if the lender fails to comply with that statute), but such rights of Subordinator shall not alter the superior priority of the lien of the mortgage upon the Land.

          Subordinator acknowledges receipt of any payment for past work that may be required as a condition of signing this Subordination Agreement. Subordinator agrees this Subordination Agreement subordinates its past and future statutory lien rights, without any conditions other than those stated above.          

NOTICE: This Subordination Agreement allows the Mortgage Company to have a first lien Deed of Trust that is superior to all your lien rights due to labor and materials for improvements to the same Land. It does not affect your rights to be paid, or to enforce collection of the debt by a lien that is junior to the Mortgage Company. However, if that Mortgage Company forecloses its Deed of Trust, that will terminate all your rights to a lien.

This document was prepared by Dwight Bickel, Regional Counsel for the title company, acting only as the attorney for the title company.

IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, EACH PARTY SHOULD CONSULT WITH HIS/HER/THEIR ATTORNEYS WITH RESPECT THERETO.                                                

If this agreement is executed in the name of a corporation, signature of an authorized officer is required. If in the name of a partnership, signature of at least one of the partners is required.

DATED this   day of                          , 20.

Contractor Company Name:                                                                                

Signature:                                                                                                                
                                    By:                                                                             
                                    Title:                                                  

EXHIBIT A