A mortgage syndicate is an alliance of investors who agree to loan together on a mortgage. The agreement between them is documented in a Syndication Deed. The key terms of such an agreement are:
- manner & form of voting rights, namely how much weight will be given to the vote of each investor in making commercial decisions.
- how specific eventualities will be handled (not subject to overturn except through a unanimous vote).
Voting propositions can be put by any investor, the mortgage lawyer or the administrative agent. All propositions must be capable of a yes or no answer. The weight of each investor’s vote is usually determined by their contribution to the principal.
In relation to specific eventualities the members of the syndicate can agree that the property must be sold (and cannot be held), in the event of a unremedied default, even if that would result in a shortfall. They can also agree that if the property is to be developed the investors cannot be made to contribute to the development costs unless they voted in favour.