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What are the recommended provisions for a Lease Subordination Agreement?

Table of Contents

  1. Introduction

  2. Recommended Provisions for a Lease Subordination Agreement 2.1. Definitions 2.2. Subordination 2.3. Non-Disturbance 2.4. Attornment 2.5. Estoppel Certificate 2.6. Default and Remedies 2.7. Notices 2.8. Governing Law and Jurisdiction 2.9. Entire Agreement 2.10. Severability 2.11. Waiver

  3. Conclusion

Introduction

This response will provide a comprehensive overview of the recommended provisions for a Lease Subordination Agreement in Kenya. The provisions outlined below are based on common legal principles and practices, and they aim to protect the interests of both the landlord and the tenant.

Recommended Provisions for a Lease Subordination Agreement

A Lease Subordination Agreement is a legal document that establishes the relationship between a landlord, a tenant, and a lender who is providing financing for the property. It typically includes provisions that subordinate the tenant's lease to the lender's mortgage or other security interest in the property. This means that the tenant's lease is subject to the lender's rights and remedies in the event of a default by the landlord.

2.1. Definitions

The agreement should clearly define key terms, such as:

  • "Landlord": The owner of the property.

  • "Tenant": The party leasing the property.

  • "Lender": The party providing financing for the property.

  • "Mortgage": The security interest granted by the landlord to the lender.

  • "Lease": The agreement between the landlord and the tenant for the lease of the property.

2.2. Subordination

This section should clearly state that the tenant's lease is subordinate to the lender's mortgage or other security interest in the property. This means that the tenant's lease is subject to the lender's rights and remedies in the event of a default by the landlord.

2.3. Non-Disturbance

This section should provide that the lender agrees not to disturb the tenant's peaceful possession of the property, even if the landlord defaults on the mortgage. This provision protects the tenant's right to continue occupying the property, even if the landlord loses ownership.

2.4. Attornment

This section should require the tenant to attorn to the lender in the event of a foreclosure or other transfer of ownership of the property. This means that the tenant will recognize the lender as the new landlord and continue to pay rent to the lender.

2.5. Estoppel Certificate

This section should require the tenant to provide the lender with an estoppel certificate, which confirms the terms of the lease and the tenant's current status under the lease. This certificate helps the lender to understand the tenant's rights and obligations.

2.6. Default and Remedies

This section should outline the consequences of a default by the landlord on the mortgage. It should also specify the lender's remedies in the event of a default, such as the right to foreclose on the property.

2.7. Notices

This section should specify the method and address for delivering notices under the agreement. It should also specify the timeframes for delivering notices.

2.8. Governing Law and Jurisdiction

This section should specify the governing law and jurisdiction for resolving any disputes arising under the agreement.

2.9. Entire Agreement

This section should state that the agreement constitutes the entire agreement between the parties and supersedes all prior or contemporaneous communications, representations, or agreements, whether oral or written.

2.10. Severability

This section should provide that if any provision of the agreement is held to be invalid or unenforceable, the remaining provisions will remain in full force and effect.

2.11. Waiver

This section should state that no waiver of any provision of the agreement will be effective unless in writing and signed by the waiving party.

Conclusion

A well-drafted Lease Subordination Agreement is essential for protecting the interests of all parties involved in a real estate transaction. The provisions outlined above are intended to provide a framework for a comprehensive and legally sound agreement. It is important to consult with an experienced legal professional to ensure that the agreement is tailored to the specific circumstances of the transaction.

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