Different liens on the same property usually have priorities according to the time of their creation. To achieve the subordination of a prior lien, there must be an actual agreement to that effect.
This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.
Title: Rhode Island Agreement to Subordinate Lien Between Lien holder and Lender Extending Credit to Owner of Property Subject to Lien Keywords: Rhode Island, Agreement, Subordinate Lien, Lien holder, Lender, Extending Credit, Property Subject to Lien Introduction: In Rhode Island, an Agreement to Subordinate Lien serves as a legal document executed between a lien holder and a lender, which allows the lender to extend credit to the owner of a property subject to an existing lien. This agreement outlines the terms and conditions under which the lien holder agrees to subordinate their lien position to the lender, allowing them to take priority on the property in the event of default by the property owner. Let's explore further details about this agreement and its various types in Rhode Island. 1. Rhode Island Agreement to Subordinate Lien to Secure Additional Financing: This type of agreement is commonly used when a property owner seeks additional financing for a property already encumbered by an existing lien. By entering into this agreement, the lien holder agrees to subordinate their lien in favor of the lender granting additional credit to the owner. This allows the lender to secure their interest and rank first in priority, while the original lien holder's interest becomes secondary. 2. Rhode Island Agreement to Subordinate Lien for Refinancing: When a property owner decides to refinance an existing mortgage or loan, this type of agreement is crucial to establish a new lien priority hierarchy. In this case, the lender, providing a refinancing loan, requires the existing lien holder to subordinate their lien to enable the refinancing transaction. By signing this agreement, the existing lien holder agrees to adjust their lien's priority to allow the new lender's lien to be primary. 3. Rhode Island Agreement to Subordinate Lien for Additional Collateral: Sometimes, property owners seek to offer additional collateral to secure a new loan without affecting the existing lien's priority. Through this agreement, the lien holder consents to subordinate their lien for the additional collateral provided, allowing the lender to obtain a primary position on the newly added assets if the owner defaults on the loan. 4. Rhode Island Agreement to Subordinate Lien for Construction Financing: When construction financing is required to initiate a building project on a property already subject to a lien, this agreement helps establish the priority of the new lien. By subordinating their lien, the existing lien holder allows the lender providing construction financing to take primary position. This arrangement ensures that the lender will have adequate security interest during the construction period and, with repayment, will likely move back to a secondary position behind the original lien. Conclusion: In Rhode Island, the Agreement to Subordinate Lien performs a crucial function in allowing lenders to provide credit to property owners with existing liens. Understanding the various types of these agreements, such as those related to securing additional financing, refinancing, additional collateral, or construction financing, helps ensure that all parties involved are protected. It is important for both lien holders and lenders to consult with legal professionals to draft and execute these agreements accurately, balancing the interests of all parties involved.
