If you are involved in the real estate finance industry, you may be familiar with the term Intercreditor Agreement (ICA). An ICA is a legal document that outlines the relative priorities and rights of multiple lenders who have lent money to the same borrower. Usually, an ICA is necessary when there are two or more lenders involved, each with a different type of claim on a borrower`s assets, such as a mortgage or a mezzanine loan.
In recent times, a new type of ICA has emerged in the real estate finance market, called the LMA Real Estate Finance Intercreditor Agreement. The LMA (Loan Market Association) is a trade association that represents the interests of the lending community. The LMA has created a standard form of ICA for use in real estate finance transactions.
The LMA Real Estate Finance Intercreditor Agreement has become a popular choice for many lenders in the real estate finance industry. This is because it provides a clear and concise framework for lenders to understand their rights and obligations in relation to each other, and it also helps to reduce the negotiation time and costs associated with creating a bespoke ICA for each transaction.
There are several key features of the LMA Real Estate Finance Intercreditor Agreement that make it an attractive option for lenders. Firstly, it clearly sets out the priority of payments to be made to each lender in the event of default by the borrower. This includes details on the amounts that each lender is entitled to receive, and the order in which they should be paid.
Secondly, the LMA Real Estate Finance Intercreditor Agreement includes provisions for the management of the security or collateral that the lenders have taken from the borrower. This includes details on how the security should be valued, managed and, in some cases, disposed of in the event of default.
Finally, the LMA Real Estate Finance Intercreditor Agreement also covers issues relating to the enforcement of the rights of the lenders. This includes details on how the lenders can enforce their rights against the borrower, and what remedies they have available to them in the event of default.
In conclusion, the LMA Real Estate Finance Intercreditor Agreement is a valuable tool for lenders in the real estate finance industry. By providing a clear and concise framework for lenders to understand their rights and obligations, it helps to reduce the negotiation time and costs associated with creating a bespoke ICA for each transaction. If you are involved in the real estate finance industry, you should consider using the LMA Real Estate Finance Intercreditor Agreement in your next transaction.