What are ‘intercreditor deeds’ and why they matter

When investors look at investment opportunities, there are a lot of questions around security and risk. All CrowdProperty’s project loan investments are secured by first mortgage — this means our investors’ money is the last into a project loan, and the first out once the project is completed and investors are ready to be repaid.

But there are often other investors and funds in a project, so how do we ensure everyone knows the order of repayments?

That’s where intercreditor deeds come in.

Intercreditor deeds are legal agreements made between the different investors and lenders for a project. The purpose of the intercreditor deed is to outline the order of repayments, as well as to clarify the position of investors within the capital stack.

The agreements are usually made between first mortgage holders and second or subsequent mortgage holders, who rank differently when it comes to priority of payment.

As a legal measure, this helps avoid any potential disputes when it comes to which financiers receive payment first.

The intercreditor deed may outline the terms of the loans provided by each creditor, including the amount of the loans, the interest rates, the repayment schedules, and any fees or charges associated with the loans. It may also establish the priority of the loans in the event of default or sale, specifying which creditor will be paid first and how any remaining funds will be distributed.

CrowdProperty is open to having second mortgage holders on our loans, as well as securities which are a caveat on our loans.

However, when developers take out loans but have a second mortgage or a caveat security on a property, CrowdProperty will request that they enter an intercreditor deed. This is one more layer of security for our investors.

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