From time to time, discussions with our SBA 504 staff counterparts provide helpful insight about emerging issues. Recently, I worked with SBA District Counsel in California that asked me to submit copies of Subordination agreements recorded by the SBA 504 Priority or Permanent Lender. This is not part of the normal submission package and therefore made me curious about the inquiry.
Here is what I was able to take away from this SBA 504 project. The concern being discussed at SBA is whether or not a Subordination Agreement involving the Eligible Passive Company (“EPC”) and Operating Company (“OC”) could create any legal basis for the OC to affect the SBA’s ability to liquidate the subject property (SBA 504 Collateral)? Of particular concern to the SBA is whether or not the Subordination Agreement contains any Nondisturbance and Attornment language? SBA counsel is sensitive to the possibility that Nondisturbance and Attornment language might provide a basis for the OC to claim a right to remain in the property after the foreclosure, presumably with favorable rent and for a long term, therefore affecting the market value of the property and ultimately the ability of SBA to recover its principal investment.
As part of the Bolt Law Group review process we review the documents of the Senior Lender and therefore had collected the Subordination Agreement requested by SBA District Counsel. The Subordination Agreement involved in the SBA 504 project created none of the concern outlined above and therefore caused no delay in obtaining SBA 504 funding clearance. At Bolt Law Group we work diligently to stay abreast of developments in the SBA 504 industry to ensure that our clients have the most effective and professional support possible. Give us a call today 424-265-8529 to learn more about Bolt Law Group and our focused approach to supporting SBA 504 lenders.
Here is what I was able to take away from this SBA 504 project. The concern being discussed at SBA is whether or not a Subordination Agreement involving the Eligible Passive Company (“EPC”) and Operating Company (“OC”) could create any legal basis for the OC to affect the SBA’s ability to liquidate the subject property (SBA 504 Collateral)? Of particular concern to the SBA is whether or not the Subordination Agreement contains any Nondisturbance and Attornment language? SBA counsel is sensitive to the possibility that Nondisturbance and Attornment language might provide a basis for the OC to claim a right to remain in the property after the foreclosure, presumably with favorable rent and for a long term, therefore affecting the market value of the property and ultimately the ability of SBA to recover its principal investment.
As part of the Bolt Law Group review process we review the documents of the Senior Lender and therefore had collected the Subordination Agreement requested by SBA District Counsel. The Subordination Agreement involved in the SBA 504 project created none of the concern outlined above and therefore caused no delay in obtaining SBA 504 funding clearance. At Bolt Law Group we work diligently to stay abreast of developments in the SBA 504 industry to ensure that our clients have the most effective and professional support possible. Give us a call today 424-265-8529 to learn more about Bolt Law Group and our focused approach to supporting SBA 504 lenders.
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