Maine Subordination Agreement — Lien: A Detailed Description A subordination agreement is a legal document commonly used in real estate transactions in Maine to prioritize the order in which liens are paid off. Liens are legal claims or rights against a property that serve as a form of security for a debt. When multiple liens exist on a property, a subordination agreement establishes the priority of these liens, determining which creditors will be paid first in the event of a foreclosure or property sale. In Maine, there are several types of subordination agreements related to liens, including: 1. Mortgage Subordination Agreement: This type of subordination agreement is used when there are multiple mortgages on a property. It establishes the order in which the mortgages will be paid off, with the senior (higher-ranking) mortgage being repaid first and the junior (lower-ranking) mortgage(s) being repaid thereafter. 2. Construction Subordination Agreement: This agreement is commonly used in construction projects where a contractor or subcontractor has placed a lien on a property for unpaid work. It allows the construction lien to be subordinated to another lien (such as a mortgage), ensuring that the higher-priority lien is satisfied first. 3. Intercreditor Subordination Agreement: This type of subordination agreement is used when there are multiple creditors involved in a loan or financing arrangement. It outlines the priority of each creditor's claim, ensuring that they are repaid in the specified order. 4. Tax Lien Subordination Agreement: When a property has a tax lien filed against it by a governmental entity, a subordination agreement can be utilized to prioritize the tax lien's position in relation to other liens. It is important to note that the terms of a Maine subordination agreement must adhere to state laws and regulations. Parties involved should consult with legal professionals specializing in real estate transactions to ensure compliance and proper execution of these agreements.
Maine Subordination Agreement - Lien
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A Subordination Agreement focuses on creditor priorities and security claims, providing legal certainty to creditors when assessing repayment risk. If a credit event (or default) occurs, a subordination agreement provides a senior lender superior repayment rights than the subordinated lender.
Subordination is the act or process by which one person or creditor's rights or claims are ranked below those of others, dealing with the distribution priority of debts between creditors.
There are two ways to subordinate tranches of debt so that one tranche takes priority over the other. The first is called lien subordination, in which two forms of senior, equally ranked debt share the same collateral, but one is given priority over that collateral in case of liquidation.
In Maine, all lien claimants without a contract directly with the property owner must file their lien claim (called a Notice of Lien) in the registry of deeds for the county in which the property is located within 90 days of the date of last furnishing labor or materials for the project.
Lenders can execute what are referred to as executory subordination agreements. Executory subordination agreements are essentially a promise to enter into a subordination agreement in the future if another loan enters the picture, like a construction loan.
An example is a trust document that includes a subordinate clause. This requires it to state that once the primary lien becomes active, a secondary lien becomes automatically subordinate. For instance, if a trust pays education funding as a first priority, the first lien is tuition.
A Subordination Agreement is a legal document that establishes the priority of liens or claims against a specific asset.
A subordination agreement must be signed and acknowledged by a notary and recorded in the official records of the county to be enforceable.