What the H&@% is a Subordination and Do I Need One?

As you all know, when you have a project with an existing Deed of Trust, the Department of Real Estate requires that the existing loan be made subordinate to the CC&Rs.  This is accomplished through recording a “Subordination” or “Consent of the Lien Holder”, which effectively allows the CC&RS to “jump ahead” of the CC&Rs in priority of title.

Do you know why the DRE requires this arrangement to be in place?  Their mission is to provide consumer protection for purchasers in subdivisions.  In this instance, to protect the homeowners’ association and the individual owners. The DRE assures that, in the unlikely event, if the Lender forecloses on the property, the CC&Rs will remain “of full force and effect,” and all lots will continue to be “subject to” the terms of the CC&Rs document.  This includes the HOA, in the case of a common interest subdivision.  Without a subordination, the Lender foreclosure would “wipe out” the CC&Rs and any other documents recorded subsequent to the loan that didn’t include a subordination.

Recently, the DRE has begun asking for a Subordination document not only for the CC&RS, but for ANY recorded Maintenance Agreements as well!  Several Final Public Reports have been delayed because the Lender consent was not in place.  If your subdivision includes CC&Rs, or any type of Maintenance Agreement or Use Agreement, the requirement for a Subordination applies to you.  We welcome you to call us today and discuss the specifics further.  It could save you having to deal with costly delays from an unexpected Deficiency from the DRE.

Hi, I'm Scott

I'd love to learn more about your new development or project. Use the link below to request a proposal.


Stay up to date.

Sign up our newsletter for latest article and news.
Community Associations and Inflation

Community Associations and Inflation: Strategies for Resilience and Financial Stability

Inflation is a persistent issue that wreaks havoc on the financial health of community associations. From project delays to regular assessment increases and impact on reserve funds, the effects of inflation can be far-reaching and challenging to manage. Community association boards must be proactive in mitigating the impact of inflation to ensure that they can continue to provide necessary services to their members while also planning for future capital projects.

Read More »
Your Go-To for DRE Public Report Processing

Your Go-To for DRE Public Report Processing

If you are a real estate developer in California, obtaining a public report from the Department of Real Estate (DRE) is a crucial step in your project’s success. The public report discloses important information about the development to prospective buyers, such as an overview of the community, the developer’s financial stability, the project’s legal status, the association’s monthly assessments (if any), and the estimated completion date.

Read More »
Reserve Study Misconceptions: Debunked

Reserve Study Misconceptions: Debunked

As an owner or manager of a homeowner’s association or other planned community, it’s your responsibility to ensure that finances are properly managed. Reserve studies are vital for an association to maintain its financial health, as they are required to take place every three years in accordance with CA Civil Code 5550. However, there are several misconceptions about them. We’re going to divulge some of the most common myths about reserve studies and explain why they are untrue.

Read More »
Schedule a Call
Discuss your project or needs with someone from the California Builder Services team.