Jurisdiction(s):
United Kingdom

Key definition

Priority definition

What does Priority mean? Priority describes the order in which competing proprietary rights and security interests take effect against an asset and the sequence in which secured creditors are paid on enforcement or insolvency. It is a cross‑context concept informed by statute and case law (for example, land registration legislation, companies legislation on registration of charges, and equitable rules on notice). In practice, priority is usually set by time and method of perfection: creation and registration of mortgages/standard securities over land (e.g. under the Land Registration Act 2002 in England and Wales and the 2012 Scottish legislation), registration of company charges (at Companies House under...

Practitioners’ guide to subordination in finance transactions under English law: contractual (simple, turnover, trust) and structural methods, intercreditor vs priority deeds, insolvency outcomes, and key drafting traps

Published by a LexisNexis Banking & Finance expert

Practice notes

Subordination

Subordination is the reordering of claim Priority against a debtor, whereby one creditor or a group (the junior creditor(s)) agrees that its debt will not be satisfied until liabilities owed to another creditor or group (the senior creditor(s)) have been paid. In effect, it changes the sequence in which creditors are repaid.

This Practice Note explains:

why subordination is adopted in particular finance transactions
the two principal forms of subordination:
- contractual subordination, and
- structural subordination, and
how Insolvency affects subordination

This Practice Note concentrates on the core principles for subordinating debt. Intercreditor agreements will typically address a broad range of matters, one of which is the subordination of junior debt. For fuller detail on how subordination provisions are included in, and drafted within, an intercreditor agreement, see Practice Note: Introductory guide to Intercreditor Agreements—refer in particular to the section Ranking and subordination provisions. For a precedent subordination deed, see Precedent: deed-single company borrower-single unsecured senior lender-single unsecured junior lender. It also signposts where these provisions sit within intercreditor documentation...

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Web page updated on 21/05/2026

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