California Law Subordination Agreement

In the absence of sufficient specificity, the courts cannot explicitly enforce a seller`s performance agreement in order to subordinate it at a later date. The reasons for this situation are related to the risk incurred by the seller`s right of pledge. Before the completion of construction, the property is overloaded, its value being lower than the total value of loans without improvement. If the borrower does not comply with its construction obligations, sellers generally cannot take over and complete the construction or make payments for construction credit to avoid the forced execution of the construction loan. Even though a seller`s lender subordinated to a construction loan may sue a borrower after enforcement (with the exception of the anti-weakness limitation of purchase loans), the borrower may not have sufficient assets to make the continuation of this default profitable. the minimum and maximum repayment period; (2) maximum ratio of credit to construction value or costs; (3) the requirement that construction credits may be used only for construction or other specific purposes; (4) a description of the improvements to be made to the land; (5) an obligation for the construction lender to inform the seller and to have the opportunity to coax all defaults in the construction loan; and (6) a firm obligation of permanent financing as a condition precedent for the subordination and conditions of such permanent financing. .

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