Addressing Mortgage Subordination in Ground Leases

Olshan Real Estate partner Thomas Kearns wrote a piece recently published in New York Real Estate Journal entitled “Addressing Mortgage Subordination in Ground Leases.” In the article, Mr. Kearns discusses the confusion that often accompanies the provisions of ground lease term sheets regarding mortgage subordination. He explains that it is imperative for both lessor and lessee to understand which mortgage takes precedence in an agreement: “I regularly see term sheets,” he writes, “generated for proposed ground leases and the sentence or two about mortgage subordination can be garbled. The toughest part for the lessor to understand is that the terms of the mortgage on the fee position must be subject to the terms of the mortgage on the lessee’s position.”