STG Subjection of Fee to Mortgage Instrument

SUBJECTION OF FEE TO MORTGAGE INSTRUMENT 

THIS SUBJECTION OF FEE TO MORTGAGE INSTRUMENT 1 (the "Instrument") is made by [Fee Owner's Name], a [Fee Owner's entity type], with an address at ___________________ ("Fee Owner") to and for the benefit of [Lender's name], a [Lender's entity type] with an address at ___________________ ("Lender") as of the _____ day of __________________ , 20__.

RECITALS


A. $ _________ Note from Tenant to Lender dated _______ (the "Note"); and

A. Mortgage dated ___________ from [between] Tenant to [and] Lender, [recorded on ____________ in ______________ as/at ______________ Vol/Book/Page][which will be recorded immediately prior hereto] (the "Mortgage"), which Mortgage secures the debt evidenced by the Note and encumbers Tenant's interest in the Lease (as more particularly described in the Mortgage, and hereinafter the “Tenant's Interest”);

which, together with this Instrument, shall hereinafter collectively be referred to as the “Loan Documents”.

4. Lender is unwilling to make the Loan to Tenant unless and until Lender obtains additional security for payment of the Note. It is a condition precedent to the making of the Loan that Fee Owner subject its Fee Interest (as hereinafter defined) to the lien and encumbrance of the Mortgage, such that the Fee Interest stands as security for the payment and performance of Tenant's obligations, monetary and otherwise, under the Loan Documents (collectively, the “Obligations”).

5. Fee Owner, Tenant and Lender desire and intend to further secure the Loan by granting to Lender a security interest in the Fee Interest (as hereinafter defined), encumbering the Fee Interest with the Mortgage and subjecting the Fee Interest to the lien, terms and conditions of the Mortgage such that Lender shall have a valid [first] mortgage lien encumbering the Fee Interest, to the same extent and manner as if Fee Owner had joined in the Mortgage and encumbered the Fee Interest therein.

6. Fee Owner hereby expressly acknowledges and agrees that: (a) in reliance upon and in consideration of this Instrument, specific loans and/or advances will be made by the Lender to the Tenant, and other obligations will be undertaken by the Lender and/or the Tenant, which would otherwise not be made and/or undertaken, but for Fee Owner's encumbering its Fee Interest as hereinafter set forth; and, (b) Fee Owner will benefit from the making of the Loan.

NOW, THEREFORE

In consideration of the benefits accruing to the parties hereto and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Lender to make the Loan, and as security for payment of the Note, Fee Owner hereby declares, acknowledges and agrees as follows:

1. The Fee Interest.

The term “Fee interest” means all of Fee Owner's right, title, estate and interest in and to the Premises, including, without limitation, the following:

A. Fee Owner's fee simple absolute interest in the Premises (which, as a result of the Lease, is a reversionary interest in the Premises);

A. all statutory, common law and contractual rights and liens, if any, at law and equity, that the Fee Owner has or is entitled to as landlord under, pursuant to, or as a result of the Lease, including but not limited to, the right to receive Rent (as defined in the Lease);

A. all after-acquired interests in the Premises, if any;

A. all buildings and improvements now or hereafter constructed on the Premises, if any, to the extent that Fee Owner has or will have any interest therein; and,

A. all rights to condemnation awards and insurance proceeds relating to the Premises.

2. Encumbering of the Fee Interest.

A. Fee Owner hereby grants to Lender and mortgages, conveys, assigns, pledges, encumbers and subjects the Fee Interest [“together with the appurtenances and all the estate and rights of the Fee Owner in and to the Fee Interest” 2 ] to the lien, charge, conveyance and encumbrance of the Mortgage, in the same manner and extent as if the Fee Owner had joined in and executed the Mortgage, and encumbered the Fee Interest thereby, such that and to the effect that:

(i) the lien and encumbrance of the Mortgage is hereby spread to encumber the Fee Interest in addition to the Tenant's Interest;

(i) all of the terms, conditions and provisions of the Mortgage (unless specifically excepted in this Instrument) shall be deemed incorporated herein by reference and shall hereinafter apply to, affect and govern the Fee Interest;

(i)  the Fee Interest stands as equal security in availability for payment of the Note and performance of the other Obligations, in the same manner and to the same extent as the Tenant's Interest;

(i)  the lien encumbering the Fee Interest shall have the same priority as the lien encumbering the Tenant's Interest; 3 and,

(i) Lender has all of the rights and remedies, at law and in equity, against the Fee Interest that Lender has against the Tenant's Interest pursuant to the Mortgage.

B. Fee Owner hereby grants to Lender a security interest in the Fee Interest to the same extent that the Mortgage grants a security interest in the Tenant's Interest to the Lender.

B. This Instrument creates a statutory and equitable mortgage on the Fee Interest pursuant to applicable state law.

B. Fee Owner hereby assigns all of its right, title and interest in and to the Rent to the Lender, subject to a license back to Fee Owner to receive and collect the Rent, which license shall automatically terminate upon the occurrence of a default beyond any applicable grace and cure period under the Mortgage.

3. Limitation on Fee Owner's Liability.

Fee Owner shall not be personally liable for the payment or performance of any Obligations. No judgment for money deficiencies, if any, shall be sought against or obtained from Fee Owner. Fee Owner's liability under this Instrument and the Mortgage shall be limited solely to the Fee Interest.

4. Election of Remedies; Fee Owner not a Surety.

A. Lender: (i) has the right, in its sole and absolute discretion, to elect among its rights and remedies with respect to any or all of the collateral, in whole or in part, encumbered by the Mortgage (including without limitation, the Lease, the Tenant's Interest, and the Fee Interest), in such manner, to such extent and in such order as Lender shall determine, in its sole and absolute discretion; and, (ii) has no obligation to proceed against the Tenant, the Lease, Tenant's Interest or any other collateral securing payment or performance of the Obligations prior to, in connection with, or instead of the foreclosure of Lender's lien on the Fee Interest.

A. Fee Owner waives any and all right(s) it may have to: (i) claim suretyship status or suretyship rights; (ii) demand the marshalling of assets, liens or remedies; or, (iii) require Lender to proceed against or exhaust its remedies against any other entity (including, without limitation, Tenant) or property (including, without limitation, the Lease or Tenant's Interest) prior to foreclosing Lender's lien on the Fee Interest.

A. As regards the Lender's rights and remedies under the Note, Mortgage and this Instrument, with respect to the Fee Interest, except as specifically set forth in Paragraph ___ hereof, 4 Fee Owner is and shall be deemed a principal, not a surety, with respect to the Loan.

A. Notwithstanding the foregoing, as between Fee Owner and Tenant only, Tenant shall indemnify, defend and hold Fee Owner harmless from and against any and all claims, costs, liabilities, damages and expenses that Fee Owner may incur, directly or indirectly, arising out of or relating to this Instrument (including but not limited to Tenant's default(s), if any, under the Mortgage, and Fee Owner's cure, if any, thereof) and/or Lender's foreclosure of the Fee Interest. Such indemnification shall include reasonable attorneys' fees and expenses incurred by the Fee Owner, including but not limited to those incurred in defense of any foreclosure action and/or in the enforcement of this indemnification, and shall survive the foreclosure of the Fee Interest and/or the Tenant's Interest, and the expiration or termination of the Lease.

A. This Instrument shall not alter or impair any rights and remedies that the Lender has or may have under the Mortgage or any other Loan Documents against the Tenant, the Lease, or any other collateral security for the Loan.

5. No Obligation of Lender to Oversee Disbursements.

Lender has no obligation or duty, legal or equitable, to oversee the application of the Loan proceeds towards the improvement of the Premises, or to undertake or complete such improvements, if any. Such obligation(s), if any, shall be the sole responsibility of Tenant. Lender has made no representation that it will oversee the application of the Loan proceeds in any manner. The failure, if any, of the Tenant to apply the Loan proceeds to improvements to the Premises or as otherwise provided in the Loan Documents shall not be a defense to the enforcement of this Instrument and the foreclosure of the Mortgage against the Fee Interest. Fee Owner waives any claims or defenses it may have, if any, at law or in equity, against Lender and Lender's enforcement of the Mortgage arising out of or in connection with the foregoing.

6. Notice to Fee Owner and Opportunity to Cure Defaults.

A. All notices given by Lender or Tenant under the Lease shall also be given in the same manner to Fee Owner, to the following person(s) at the following addresses: ___________________________________ .

A. In the event of a default under the Mortgage, no suit or foreclosure of the Mortgage as against the Fee Interest shall be commenced until Lender has given not less than thirty (30) calendar days' written notice (the “Notice of Default”) to Fee Owner of such default.

A. Fee Owner shall have the right, but not the obligation, to cure any default under the Mortgage (whether before or after receipt of the Notice of Default), prior to the consummation of the foreclosure of the Fee Interest.

A. At the option of Fee Owner, in its sole discretion, a default beyond any applicable notice and grace period by Tenant under the Mortgage (notwithstanding a cure, if any, of such Mortgage default by Fee Owner) shall also be deemed a default beyond any applicable notice and grace period by Tenant under the Lease.

7. Payment Subordination.

A. Rent. Fee Owner subordinates its right to receive Rent or other payments from or on account of the Tenant (pursuant to the Lease or otherwise) to the payments (principal, interest or otherwise) required to be made pursuant to the Mortgage (to the Lender or as otherwise required by the Mortgage). If, and to the extent that there are insufficient funds to pay all such amounts as they become due, the payments required by the Mortgage shall be paid prior to the payment of any Rent. Fee Owner shall neither request nor accept any payment(s) of any Rent if, and so long as, Fee Owner has notice that any amounts due and payable under the Mortgage are outstanding.

A. Condemnation Awards and Insurance Proceeds. Fee Owner subordinates its rights (pursuant to the Lease or otherwise) to receive condemnation awards and insurance proceeds relating to the Premises to the rights of the Lender pursuant to the Mortgage. The terms of the Mortgage shall govern the disposition and application of such condemnation awards and insurance proceeds.

8. Miscellaneous.

A. The Recitals set forth above are deemed agreed to and accepted by all parties hereto.

A. This Instrument is self-operative. Upon execution and delivery of this Instrument, Fee Owner's subjection of the Fee Interest to the lien and encumbrance of the Mortgage is absolute, perfected, unconditional and irrevocably consummated. This Instrument is not executory in any manner. Notwithstanding the foregoing, at any time and from time to time, at the request of Lender or Tenant, Fee Owner shall execute, acknowledge and deliver such additional documentation (including but not limited to an additional mortgage evidencing the encumbering of the Fee Interest) as is reasonable and necessary to fulfill the intent and purpose of this Instrument.

A. This Instrument does not create or secure a new or further indebtedness or obligation other than the principal indebtedness or obligation secured by or which under any contingency may be secured by the Mortgage. 5

A. The recording of this Instrument prior to, simultaneously with or subsequent to any of the Loan Documents shall not affect the validity, enforceability or effect hereof.

A. Upon full payment and performance of the Obligations, Lender (or its assignee) shall execute and deliver an instrument, in recordable form, releasing the Fee Interest from the lien and conveyance of the Mortgage. 6

A. No modification or amendment of this Instrument or any of the other Loan Documents shall be made without the prior written consent of the Fee Owner, which consent shall not be unreasonably withheld, denied or delayed, provided that the requested modification does not: (i) extend the term of the Loan; (ii) increase the Tenant's Obligations under the Loan Documents; (iii) release the Tenant or Tenant's principals from liability under the Loan Documents; or, (iv) materially increase the potential risk of foreclosure of the Mortgage or otherwise adversely affect the Fee Interest.

A. Unless specifically set forth herein, this Instrument shall not be deemed to be: (i) a waiver of any of Fee Owner's rights or remedies as Landlord under the Lease; or, (ii) a consent to any additional encumbering of the Tenant's Interest by the Tenant.

A. This Instrument shall be deemed a modification of the Mortgage. Lender and Tenant join herein for the purposes of acknowledging and agreeing to such modification.

9. Boilerplate Provisions [noted by topic]

A. Binding on and inure to the benefit of all successors and assigns
B. Covenants running with the land
C. Counterparts
D. Severability
E. Governing Law: the law of the state where the property is located
F. Due Authorization 7

IN WITNESS WHEREOF, the undersigned has duly executed and acknowledged this Instrument as of the date first set forth above.

________________________________
Fee Owner

Lender and Tenant join in this Instrument solely to acknowledge and agree: (a) to their respective obligations and undertakings as specifically stated herein, and (b) that the Mortgage is deemed modified as stated herein.

________________________________
Lender


________________________________
Tenant


Attachments: 1. Acknowledgments
 2. Exhibit A: Property Description

Footnotes

1. This document is designed to complement a mortgage. It may require modifications in order to complement a deed of trust, including formalities relating to the beneficiary, trustee, reconveyances, etc.

2. This is an example of state-specific statutory language applicable to the granting of a mortgage/deed of trust. Pursuant to N.Y. Real Prop. Law § 255, the bracketed language must be construed as including all interests of the grantor/mortgagor, including reversions.

3. In order to insure this, the title company will have to do a “run down” to confirm that there have been no intervening liens.

4. Insert reference to non-recourse section. In this form it is paragraph 3.

5. In mortgage recording tax states, if the mortgage recording tax has been paid upon recording of the mortgage, and there is no additional secured debt, this instrument should not incur any additional mortgage recording tax. The instrument can be viewed as an ancillary security document, similar to an Assignment of Leases and Rents. For example, in New York, a “( 255 Affidavit” (with language similar to that stated above) would be executed pursuant to ( 255 of the N.Y. Tax Law in order to record this instrument without payment of additional mortgage recording tax. This recital serves as a reminder to the parties to prepare such affidavits, if required.

6. When the debt is paid, the tenant may not care if the lender delivers a satisfaction of the mortgage, since the tenant's interest in the property will generally cease to exist when the lease ends. However, the fee owner will want the satisfaction to be recorded. This clause obligates the lender to provide a satisfaction to the fee owner upon payment of the mortgage in full.

7. The instrument must be duly authorized. If the fee owner is an entity, it should be in good standing, and resolutions/consents applicable to the making of a mortgage should be prepared which authorize the transaction and designate a person to sign on behalf of the fee owner.

No Guidelines are available for this form at this time.