A lease of property is subject to mortgages and other liens upon the property of record when the lease is made; that is, such liens would be superior to the rights of the tenant. When the lease is made the tenant usually takes possession of the property. He may also record his lease. Either would give notice to persons thereafter dealing with the property of the rights of the tenant and a mortgage made after the lease would therefore be subordinate to the lease. It would seem to be important, therefore, that tenants who propose to erect a building or spend money in considerable amounts on the property, should inquire into existing mortgages. It is also important for mortgagees to find out about existing leases. Leases may be an advantage to the property, rather than a disadvantage, the amount of rent and length of time called for by the lease being the determining factors. A case is on record where a bank loaned $82,000 on a piece of property, ignoring the rights of the people in possession. The mortgage was afterwards foreclosed and it was then found that the property was occupied by tenants having a ten-year lease with an option of a further renewal of ten years at an annual rental of $6,000. It is evident that a rent of $6,000 was entirely inadequate for a piece of property costing a mortgagee in excess of $82,000 and the lease was especially disadvantageous in that it had a long time to run at the low rental.

Leases often provide that they shall be subordinate to mortgages up to a certain amount and this provision may permit the landlord to increase existing mortgages up to the agreed amount. The provision of the lease should be that the tenant will execute necessary agreements to effect such subordination.