Tennessee Subordination of Mortgage / Deed of Trust to Oil and Gas Lease In Tennessee, when an oil and gas lease is granted on a property that has an existing mortgage or deed of trust, a subordination agreement may be required. This agreement acts as a legal document that prioritizes the rights of the lessor (landowner) over those of the lien holder (mortgage lender) regarding bonus and royalty payments until the lien holder provides notice. The subordination agreement ensures that the lessor receives the full benefit of any bonus or royalty payments associated with the oil and gas lease, without interference from the lien holder. Until the lien holder provides written notice, the payments will go directly to the lessor. There are several types of Tennessee Subordination of Mortgage / Deed of Trust to Oil and Gas Lease: 1. Standard Subordination: This is the most common type of subordination agreement. It outlines the terms and conditions under which the lessor will receive bonus and royalty payments until notice from the lien holder is given. 2. Partial Subordination: In some cases, the parties involved may agree to a partial subordination of the mortgage or deed of trust. This means that only a portion of the bonus and royalty payments will go to the lessor until the lien holder provides notice. 3. Temporary Subordination: This type of subordination agreement may be used when the lien holder grants temporary priority to the lessor over bonus and royalty payments for a specific period. Once the specified time elapses or the condition is met, the lien holder regains priority. 4. Reverse Subordination: In rare cases, the lessor may agree to reverse the order of priority, giving the lien holder the first claim to the bonus and royalty payments until notice or a specified condition occurs. It is essential for all parties involved in a Tennessee Subordination of Mortgage / Deed of Trust to Oil and Gas Lease to understand the terms and ramifications of the agreement fully. Seeking professional legal advice is highly recommended ensuring compliance with Tennessee state laws and protect the interests of both the lessor and the lien holder.
Tennessee Subordination of Mortgage / Deed of Trust to Oil and Gas Lease with Bonus and Royalty Payments to Go to Lessor Until Notice from Lienholder
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Subordination. This Security Instrument is and shall be automatically subordinate to a loan made to Borrower evidenced by a purchase money promissory note and secured by a first deed of trust (the ?First Deed of Trust?) recorded concurrently herewith on the Property.
A subordination agreement is one where the lending party agrees to assign the pre-existing lien a lower priority to a subsequent oil and gas lease. As a result, it is as if the lease had been executed and recorded prior to the lien.
The party that primarily benefits from a subordination clause in real estate is the lender. However, if you decide to pursue a second mortgage, then the subordination clause prioritizes the first lender's repayment and contract rights. The most common application of subordination clauses is when refinancing a property.
A subordination clause is a clause in an agreement that states that the current claim on any debts will take priority over any other claims formed in other agreements made in the future.
Subordination agreements are used to legally establish the order in which debts are to be repaid in the event of a foreclosure or bankruptcy. In return for the agreement, the lender with the subordinated debt will be compensated in some manner for the additional risk.
By Practical Law Banking and Finance. This is a standard subordination deed to change or regulate an arrangement between two creditors that are owed debts by a common debtor, under which one creditor agrees to defer payment of its debt in favour of the debt of another creditor.