Subordination Clause

Definition: A subordination clause is a provision under which one interest or lien is placed below another in priority when stated conditions apply.

Example

A land seller's financing terms allow an approved construction mortgage to take priority over the seller's lien.

Keep the distinction clear

Priority is not the same as loan size or payment amount. A clause does not make every later loan automatically senior.

Related terms

Subordination Agreement · First Mortgage · Junior Mortgage

Keep studying

Mortgages: Borrower, Lender, Ownership, and Key Clauses

References: Cornell LII: subordination agreement

Pronunciation (US): suh-bor-dih-NAY-shuhn KLAWZ (capitals show stress)

Pronunciation reference: Merriam-Webster