Standstill Agreement Commercial Real Estate

If a company obtains another loan against its existing guarantees, it will convince the first lender to be subordinated to the new loan, or receive a new loan subordinated to the first. In both scenarios, lenders use a subordinate agreement to sketch out the terms between them. Some priority lenders may include a standstill clause or clause to protect their interests. If this is the case, the resulting agreements are called subordination and status quo agreements. From the perspective of the previous lender, when the borrower is overdue, the previous lender wants to have control and does not want the subordinated lender or any other person to dictate the enforcement actions that will be taken in this regard. Senior Lenders also requires a standstill clause if junior Lenders` shares may compromise Senior Lenders` guarantees or refund.