mortgage subordination agreement.

What step do I take if mortgage company won't sign agreement. They are not c coming on my land or anywhere near it but we are just part of the unit. Please advise

ThNks

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Permalink Reply by george m vietze on June 6, 2014 at 1:13am

A gas company that leases land for mineral rights own a Leasehold Interst in the land and usually can only borrow money using the interest they have in the Lease and cannot borrow money on the fee title of the land

owned by the owner of the land, the Lessor, unless...that owner agrees to SUBORDINATE that interest by signing a Subordination Agreement.  If you have a mortgage loan on the property the bank that loaned money on the mortgage will NOT agree to subordinate their position to loans that the gas company wants to

borrow.  If the agreement calls for you or the bank to subordinate your interest to the gas companies millions of dollars of loans you better run to see an attorney FAST.  FAST FAST

 

Possibly the agreement is NOT a subordination agreement for the debt of the gas company but just an acknowledgement of the gas lease interest that is an entirely different story....but just the word Subordination...usually means allowing that company to be subordinate to your debt.......be careful....!!

Permalink Reply by kit on June 6, 2014 at 6:28am
So..should I see a lawyer.
Permalink Reply by george m vietze on June 6, 2014 at 8:27am

If the agreement they are asking you to sign allows them to put a lien against your land fee title interest, which they are not entitled to now because it is YOUR land, the gas company only should have a lease (leasehold interest) which gives them the right to produce minerals.

If you subordinate your interest in your land to their lien and they borrow millions of dollars and use your land for part of their collateral and they default on their loan their bank will foreclose on your land.  I would run not walk to an attorney and have your attorney explain just what that agreement means.

Permalink Reply by george m vietze on June 6, 2014 at 8:36am

Since your bank was asked to sign the "subordination agreement" you must already have a loan or mortgage on your land.  Your bank would never allow the gas company to have a prior position to their existing loan---Why?

 

Some banks are not loaning money on land that is leased to gas comanies and I thought the gas company was notifying loan holders that the land they are going to drill on has been leased but you called the agreement a Subordination Agreement which usually allows someone to have to be put in a subordinate position to their existing loan which now is in a first position.  Most people would not sign such an agreement.

 

Permalink Reply by kit on June 6, 2014 at 9:19am
I am so glad I posted this....I think I better get a lawyer...can someone recommend......... Live in woods field ohio
Permalink Reply by kit on June 6, 2014 at 9:27am
George...I can send you the paper the gas company submitted. You see seem to be the one interested in answering my questions. I'm new to this..if you would like to provide a email..
Permalink Reply by george m vietze on June 6, 2014 at 9:39am

You and the gas company are asking the bank to allow someone other than the bank to put a lien in front of the banks existing loan and if that loan goes into default the banks position would be foreclosed on.

 

You  better check with your attorney to see if the agreement you want to have the bank sign is in fact a Subordination Agreement, if it allows the gas company to put a loan on your property and to foreclose you and your bank in the event of default, why would you or the bank agree to that?????

 

It does not  matter that they are drilling or not drilling on your land, any subordination agreement would allow the gas company to borrow money on your land.   Are you crazy or something....why would any landowner do that.......make sure what kind of agreement they want you and your bank to sign, if it allows

anyone to borrow money on your land do not sign.  The gas company should only be allowed to borrow money on their leasehold interest not your land.....please see your attorney.....

Permalink Reply by kit on June 6, 2014 at 2:55pm
SUBORDINATION AGREEMENT

STATE OF OHIO
COUNTY OF Xxxxx xx

KNOW ALL MEN BY THESE PRESENTS:

That the undersigned (“Subordinating Lender”) is the owner and holder of that certain indebtedness secured by the
​Recording information:

That ( xxx xxxxxx x) as Lessors have sold, executed and delivered an Oil, Gas and Mineral Lease toxxxxxxxxxxxxx,)as Lessee, dated Xxxxxx . Said lease is recorded in the Xxxxxxxxx public records atxxxx. and is made a part hereof by reference; and that the undersigned has agreed to subordinate the indebtedness and the Mortgage aforesaid to the said Oil, Gas and Mineral Lease and rights thereunder.

For value received, the receipt and sufficiency of which is hereby acknowledged, the undersigned, on behalf of the Subordinating Lender, its successors and assigns does hereby covenant, consent and agree with the said Lessee, his heirs, executors, legal representatives, successors and assigns that the aforesaid indebtedness, Mortgage and liens held by the undersigned are and shall continue to be subject and subordinate to that certain Oil, Gas and Mineral lease mentioned above, insofar, and only insofar, as said Mortgage affects property described in said Oil Gas and Mineral Lease, and for all intents and purposes as if said Oil, Gas and Mineral Lease had been executed, delivered, filed, and recorded prior to the execution of said mortgage, and that the said mortgage shall hereinafter be subject to and subordinate to said Oil, Gas and Mineral Lease and all interests created thereby.

The undersigned further agrees that any sale of said land under and by virtue of said mortgage, whether by judicial proceedings, public auction and outcry, or private sale, shall be made expressly subject to the aforesaid Oil, Gas and Mineral Lease.
Permalink Reply by kit on June 6, 2014 at 2:56pm
Here's my paper that mortgage company declined...."..names and dates taken out of course...... I am trying to understand I'm confused.
Permalink Reply by kit on June 6, 2014 at 2:58pm
This Subordination Agreement shall in no way affect or impair the rights of the Subordinating Lender, its successors or assigns, to hold, foreclose or sell under said mortgage or lien in any manner prescribed by contract or law, all of the lands, hereditaments and appurtenances and estates therein, save and except the rights, titles, estates and privileges of the said Lessee under said Oil, Gas and Mineral Lease; any renewals or extensions of said lien and any foreclosures or sales of said lands or any part thereof under the aforesaid liens shall expressly except and be subject to the said Oil, Gas and Mineral lease, any extensions thereof, and Lessee's rights thereunder. (This was at end sorry)
Permalink Reply by kit on June 6, 2014 at 3:00pm
can some others chime in here. I really don't have of a lot of dough for attorney fees. ...thx
Permalink Reply by george m vietze on June 7, 2014 at 12:55am

Pat, I am not an attorney and do not give you or anyone legal advice.  I have real estate experience and any comments are just my opinion and you should consult an attorney for legal advise.

 

That said, my opinion is that the gas lease probably was signed AFTER the

lender (bank) recorded their mortgage/lien, which means the bank has a prior position (first position) than the gas lease.  This probably means that if the mortgage/loan was ever foreclosed the lease could be also wiped from the title for the new owner.  the gas company wants the bank/lender to agree that if the property is sold or foreclosed that it would agreed that the property would still be subject to the terms of the lease.  Where the subordination agreement does not mention that the gas company or lessee would be allowed to place additional liens or borrow money against the title of the land and therefore allow the lessor (gas company) to put more debt in front of the bank, without reading the lease that you are asking the bank to be in a subordinate position to, that point is not clear.  You are asking the bank to put all the terms of the gas lease in a prior position of security on the land.  Most leases probably do not have clauses that allow gas company to put liens/debt on the real estate title so it probably would not give the gas company the right to borrow money on your land but I do not think that most banks would want to give up any of their position without an incentive.

 

Sorry if it sounds complicated but the gas business is very complex and complicated and one needs legal council, hopefully someone on this site

can help you more.

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