Borrower-friendly intercreditor terms grant the mezz lender 30 to 90 days to cure monetary defaults and 60 to 180 days to cure non-monetary defaults, with a defined senior-lender standstill on enforcement actions while the cure is underway. The senior-friendly draft of zero-day cure rights can leave the mezz position economically wiped out on minor breaches.
Four points worth pushing at the senior term sheet
Cure period length: 30 to 90 days for monetary defaults (interest payment, principal payment, escrow funding) and 60 to 180 days for non-monetary defaults (covenant breach, reporting failure). The mezz lender needs runway to cure or to find a buyer for its position before senior enforcement crystallizes a wipeout.
Standstill on senior enforcement: while the mezz cure is underway, the senior lender should be standstill on accelerating the loan, foreclosing on the property, or appointing a receiver. The standstill should expire only on cure failure or material adverse action by the mezz lender.
Mezz step-in rights: the mezz lender should retain the right to cure the senior default and step into the borrower's position (typically through a UCC foreclosure on the equity pledge) without senior lender consent, subject only to satisfying defined net-worth and operating-experience tests.
What constitutes an intercreditor default vs. only a senior default: not every borrower-side covenant breach should escalate into the intercreditor agreement and trigger senior remedies. Carve out small covenant breaches, reporting delays under 30 days, and immaterial financial-covenant variances.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Semiannual Risk Perspective · Office of the Comptroller of the Currency · 2025-12