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Abstract: 

Intended to effectuate the conceptual objective of the parties, avoidance and turn-over provisions common in intercreditor agreements can lead to what may seem as a curious outcome. Should a party to an intercreditor agreement bear a financial loss due to the action (or inaction) of its counterparty? In this piece, the author examines competing views as to how intercreditor agreements allocate the consequences of a senior lien defect and offers alternatives to the status quo.

Keywords: Lien Subordination; Proper and Improper Perfection; Lien Law Controls; Fault-Based Allocation of Lien Defects; Outcome Caps to Prevent Windfalls

Affiliations:  1: J.P. Morgan.