Subordination Agreement for Easement

Suppose the person who receives the first communication knows nothing about conservation easements. How can the request be formulated in the best light? Here is an example: (The owner of the easement may ask the sheriff to issue the deed under and subject to the maintenance easement prior to the sale, but in addition to the complexity of the matter, this prevents a way from updating the easement document to the owner`s most recent form.) If the potential easement holder decides to move forward with the easement, they may want landowners to provide additional insurance to minimize the negative consequences of mortgage default. Such insurance may include the personal guarantee of the landowners secured by a mortgage on the property or other real estate interests; security in bank accounts, securities or other investment accounts; income from life insurance policies; or other assets. The purpose of the guarantee and guarantee is to ensure that if the holder of the easement has to invest funds to maintain his maintenance easement in the property, he will use other assets of the landowners to recover this investment. Is total subordination required or is an agreement sufficient to ensure the survival of the easement in the event of early closure? A consent and non-interference agreement, which is often presented to protect hereditary building rights and servitude interests, is granted rather than complete subordination. However, if a gift of servitude is to be considered a charitable gift for federal tax purposes, subordination is required. The holder of the hypothec agrees that the rights of the holder of the servitude of the servitude prevail in all respects over the rights of the holder of the hypothec under the hypothec. Such an agreement may be impossible to achieve, resulting in a major problem when subordination is mandatory. Some transactions do not require subordination; others do. For example, if the owners donate all or part of the easement and wish to receive a federal tax deduction for an eligible maintenance contribution, federal tax law requires that the mortgage be subordinated to the easement in order to be eligible for the deduction. Subordination may also be necessary to meet the requirements of a subsidy or incentive program that requires the issuance of a title policy that ensures the maintenance easement free and free of privileges.

The only downside to the mortgage holder is that if a mortgage default results in a sheriff selling the property, the non-interference agreement prevents the mortgage holder from registering the lease or easement (including a maintenance easement) as an interest to be sold by the sale (which could increase the proceeds of the sale for the mortgage holder). The sheriff`s act towards the buyer at the time of sale is and is subject to lease or servitude; they do not disappear. If an owner pledges their property, it is not a problem for the owner of a maintenance or path easement on the property. However, if an easement is placed on a property that is the subject of an already existing mortgage and that mortgage is not addressed when planning the easement, serious risks arise: is the mortgage a profitable investment for the mortgage lender? A mortgage holder may be more willing to comply with the application for protection if the loan is a viable investment; for example, it carries a higher interest rate than if the owners choose to refinance the existing loan with a new loan to allow the easement to be granted. The protection of an easement against enforcement is, of course, desirable, if not decisive, but may not be strictly necessary in all circumstances. If the owners claim a gift of the conservation easement as a not-for-profit deduction for federal tax purposes, it is necessary for the mortgage holder to waive certain rights in favour of the owner of the easement. Otherwise, the Internal Revenue Service may not allow the deduction and subject owners to interest and penalties. Article 1.170A-14(g) of the Treasury Regulations states that subordination and non-interference agreements ensure the protection of subsequent property interests. Both ensure the survival of an easement against the risk of being sold by a prior interest, but there are differences, as discussed below.

The consequences of not entering into such an agreement can be serious: if the landlord does not make mortgage payments, the mortgage holder has the power to order the county sheriff to sell the property at a public sale to repay the debt owed to him. If the holder of the mortgage has not accepted that the maintenance easement will survive such an action, the sale will be ordered freely and without the maintenance easement. The enforcement information in this guide is consistent with Practice 9.F.2. The procedure proposed for consideration where enforcement protection is not available may not be strictly consistent with practice, but will be presented as a potential means of examining whether a highly desirable maintenance easement is thwarted by an inflexible mortgage holder. It is common for utilities and other potential easement holders to require mortgagees to have non-interference agreements to ensure that their subsequent vested interests are protected in the event of foreclosure. Similarly, long-term rental interest holders who wish to make major improvements to the tenancy will need non-disruptive agreements to protect their investments in case homeowners default on their mortgage. If the mortgage holder is satisfied that the easement or lease is a benefit to the property, or at least does not reduce the merchantability or value of the security below an acceptable level, the mortgage holder is likely to agree to register a document that accepts the creation of the interest and promises not to sell the interest in the event of foreclosure. Subordination of the mortgage can cause many problems for the mortgage holder, including: a decision by a service agent to submit may violate the service agreement; a mortgage that is no longer in first place is no longer considered a guarantee for bonds; and the title policy that insures the mortgage as a first priority lien may no longer be effective. Is the mortgage held by a local bank or other credit institution? Do the owners have a good relationship with the mortgage holder? For example, are they clients who have deposit accounts with the mortgage holder and have reduced the outstanding balance of the mortgage debt? The likelihood of reaching an agreement increases when a direct call can be made to a mortgage holder who is familiar with the owners and the property and can consider a variety of factors when making a decision. .