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Standstill Provisions In Intercreditor Agreements

Other issues dealt with under the priority and status quo agreement may be: another important provision contained in the subordination agreements is the status quo. An impasse is an agreement reached by the subordinate lender, without the prior approval of the primary lender or until the end of the status quo period, not to take corrective action against the borrower or the collateral assets of the subordinated loan. The status quo period usually begins when the subordinate lender informs the principal lender in writing of a delay with the subordinated obligation and its intention to act on remedial action and then takes a fixed period of at least 180 days until an indeterminate period until the primary lender is fully remunerated. As there is usually a lot to negotiate among lenders when a priority structure is at stake, it is important to start working on this type of agreement at the beginning of a real estate financing transaction. The borrower should also be a party to a priority and status quo agreement, if only to recognize its terms. This language is different from a language that simply states that the status quo period ends 90 days after the default, which would allow the subordinate lender to enforce its security at any time after, regardless of the enforcement actions taken by the previous lender. If, according to this proposed language, the previous lender is advised by the subordinate lender that it is placed under the security of the subordinated lender (which would of course constitute a default under the security of the former lender), the previous lender may wait 89 days before coming to the execution. And if the previous lender starts to impose itself within that 90-day period, the subordinate lender must remain in status quo mode. On the other hand, the subordinate lender may not want to wait indefinitely before being allowed to take enforcement action. For example, if the previous lender did nothing for an extended period of time after the default, it could affect the lower-tier lender because of the accumulation of interest, both for loans due and for other amounts owed. For example, the subordinate lender will sometimes request that a deadline be set for the status quo (for example. B 90 days).

However, if there is a delay, the former lender could lose control of the enforcement process once the deadline has passed. The stop without a time limit (i.e. a “real” judgment) is therefore not a position to which the previous lender should easily forego. From the point of view of the former lender, the previous lender, if it is late, wants to have control and not that the subordinated lender or anyone else, including the issue, dictate the enforcement actions taken. The former lender therefore requires a status quo agreement from the subordinate lender. Whether or not the previous lender makes any compromise on the true status quo agreement depends, among other things, on the nature of the subordinated loan.