Bulletin 3/2017 – Engagement Letters for Verification Missions A subcontractor ensures that the information contained in the consolation letter is correct. The assistance of an insurer avoids the debts that the insurer must make in case of false statements and financial omissions. They confirm that no errors or errors were made at the time of the closing of the letter and investigations. They provide written evidence that formal investigations have been conducted and that the information provided is correct. The signed agreement must be recognized by a notary and recorded in the county`s official records in order to be enforceable. If you have any questions of subordination, we`d be happy to help. Make an appointment with us today. Individuals and businesses go to credit institutions when they have to borrow money. The lender is compensated if it receives interest on the amount borrowed, unless the borrower is late in its payments. The lender could demand a subordination agreement to protect its interests if the borrower places additional pawn rights against the property, z.B. if he takes out a second mortgage.
Subordination contracts are the most common in the field of mortgages. When an individual borrows a second mortgage, that second mortgage has a lower priority than the first mortgage, but those priorities may be disrupted by refinancing the original loan. Let`s go through the basics of subordination using a home credit line (HELOC) as our main example. Keep in mind that these concepts are still valid if you have a home loan. The comfort letter should include the benefits to be achieved. In this case, the issuer should not state that the letter is a precedent, but as a credit facility. Another feature is that the comfort letter does not contain an expiration date, but ends after the provision of the services indicated. In the event of a lawsuit or a new exploit, an original comfort letter is issued.
Another important point to consider in a comfort letter is a declaration of operation. The operating statement should be made at the time the letter is issued. A consolation letter should not be considered a guarantee obligation, as the issuer of the consolation letter does not take an effective payment obligation, but simply assumes the obligation to ensure that the debtor fulfils its obligations. In a 1999 Supreme Court case, the court assessed a bank`s following statement to the seller`s lawyer in connection with a business transfer: “In reference to this correspondence … We (bank) confirm below that the agreed cash purchase price, a total of 800,000 DKK, will be made available to the buyer. The amount can be transferred as soon as the contracts are properly…. and to the buyer and signed by the buyer … ». The majority of the High Court judges found that the bank justified the payment of 800,000 DKK, the statement having been established in circumstances where the bank should have understood that a guarantee had been required for the payment of the purchase price. In addition, the majority of the High Court judges found that the declaration should already be considered, on the basis of the text, as a guarantee of payment by the bank and that the bank had therefore been ordered to pay.