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A Deed of Subordination and a Deed of Postponement can both change the priority of charges over a property, but they’re not automatically identical. Their legal effect depends on the document’s wording and the transaction. Anyone asked to sign either should understand their obligations and seek independent legal advice before agreeing. Book a consultation with iLA today.
When more than one lender has a legal interest in the same property, it’s important to understand who has priority if the property is sold or the borrower defaults. This is where a Deed of Subordination and a Deed of Postponement can come into play.
Although these terms are sometimes used interchangeably, they don’t always mean exactly the same thing. Both can affect the order in which lenders’ rights are treated, but the legal effect and circumstances in which they’re used can differ.
Understanding the difference matters when taking out a second charge mortgage, refinancing an existing loan or agreeing to new lending secured against a property. Getting the wording wrong could create uncertainty about which lender has priority.
If you’ve been asking, “What is a Deed of Subordination?” or “What is a Deed of Postponement?”, in this blog, we’ll explain what each deed does, how they differ, and why understanding the distinction is important before signing either document.
In a comparison of a Deed of
Subordination vs a Deed of Postponement, the terms are often confused because both can affect the priority of lenders’ charges over a property. Put plainly, they can determine which lender ranks ahead of another if the property is sold or the borrower defaults.
HM Land Registry itself groups priority and postponement deeds within the same category of documents used to alter charge priorities. The confusion is also increased because different lenders, solicitors and legal documents may use slightly different terminology.
In some situations, “subordination” is used to describe the same basic concept as postponement, such as one lender agreeing that its interest will rank behind another’s. However, the exact legal effect depends on the wording of the document, so the 2 terms should not automatically be treated as identical. To understand such documents, book a consultation with us.
A Deed of Subordination is a legal agreement that changes the priority between two or more lenders with an interest in the same property. It allows one lender to agree that its claim will rank behind another lender’s claim.
This can be important when a borrower takes out an additional loan secured against a property. If the property is later sold or repossessed, the agreed order of priority determines which lender’s charge is dealt with first.
HM Land Registry recognises deeds that alter the priority of registered charges. The wording of the deed matters here, so it should not be assumed that every subordination agreement works in exactly the same way.
A Deed of Postponement is a legal agreement that changes the priority between charges secured against the same property. It’s commonly used when a second lender needs its charge to rank behind another lender’s charge.
For example, if a property already has a mortgage and the owner takes out more secured borrowing, the existing lender may remain first in priority while the new lender ranks behind it.
A postponement alters the priorities between charges and can be registered using a letter or deed of postponement. The exact terms can determine how far the postponement applies, so the document should always be checked properly before signing.
The key difference is that “postponement” is a specific term used by the HM Land Registry for changing the priority of registered charges, while “subordination” is a broader term that can describe an agreement to rank one lender’s rights behind another’s.
A postponement is recorded as an alteration to the priorities between charges. In practice, the terms can overlap, and a Deed of Subordination may achieve a result similar to a Deed of Postponement.
However, the name alone doesn’t determine its legal effect. The wording of the document is what matters, including exactly which rights are being changed and the extent of the agreed priority. Therefore, they can’t automatically be treated as legally identical.
Lenders may use different terms because their documents are based on their own legal requirements, lending policies, and the specific transaction. “Postponement” is a term specifically recognised by HM Land Registry for changing the priority of registered charges.
“Subordination” is also commonly used to describe an agreement in which one lender assumes a subordinate position to another. In practice, the terms can therefore overlap, particularly where a second charge is involved.
However, lenders may prefer one term because of the wording in their standard documentation or how their legal team structures the agreement. Ultimately, it’s the terms and legal effect of the document, rather than its title alone, that determine what has been agreed.
A Deed of Subordination or Deed of Postponement can affect the priority of charges over your property, so it’s important to understand exactly what you’re agreeing to.
Independent legal advice gives you the opportunity to have the document explained by a solicitor or specialist who’s acting in your interests. This can help you understand your rights, obligations and any risks before signing.
In some mortgage transactions, lenders may require certain parties to obtain ILA, especially where their interests differ from the borrower's. The advice can also help identify any concerns about the document’s terms or how the agreed priority affects you. Consult with us today.
Wondering what a Deed of Subordination or a Deed of Postponement is? Now you know that while both can affect the priority of charges, they’re not necessarily identical.
The terminology can vary between lenders and transactions, so it’s important to understand the exact wording and legal effect of the document before signing.
If you have been asked to sign either deed, getting independent legal advice can help you understand your position, obligations and any potential risks. At iLA, we specialise exclusively in independent legal advice for property and finance matters, including Deeds of Subordination.
You can easily book an appointment online with us from the comfort of your office or home. We offer a no-fuss, fully transparent pricing model based on your urgency, with pricing disclosed upfront.
Contact iLA today or book a consultation and receive expert legal guidance before making any decisions.
The information in this blog is general in nature. It is not intended as legal or financial advice. You should always obtain professional advice before making decisions based on your own circumstances.
