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Aldermen approve subordination of city lien for Grand Central Suites to allow refinancing; vote 8-6
Summary
After contentious debate about unpaid subcontractors and developer financing, the board approved a subordination of the city's insurance-proceeds lien tied to a RSA 79-E project so the owner can bring in new financing and complete construction.
The Board of Mayor and Aldermen voted 8-6 to approve a subordination agreement that will place the city—s lien on insurance proceeds behind a new lender for the Grand Central Suites redevelopment in downtown Manchester.
Attorney Eli Lano, representing Grand Central Suites LLC, told the board the subordination is needed so the developer can refinance, bring on new equity and pay subcontractors whose mechanics liens currently encumber the property. He said the city—s covenant and lien would remain recorded and would remain a clawback on insurance proceeds only in the event of a casualty and a failure to rebuild within the covenant term.
Why it matters: the parcel is a 79-E community revitalization project; the city—s recorded covenant grants a lien on casualty insurance proceeds to ensure restoration or demolition in the event of a covered loss. Lenders typically will not lend in second position, and counsel for the project said subordinating the city—s lien to the new mortgage was necessary to close refinancing and pay outstanding subs.
Board concerns were acute. Several aldermen said they could not support the move unless subcontractors are paid. "I can't support this. Not to pay people is just unacceptable," Alderman Cantor said during debate. Attorney Lano and project representatives said liens will be cleared at closing and that subcontractors will be paid from escrowed proceeds before disbursement to the owner or lender.
The vote and conditions: the motion to approve the subordination passed by roll call, 8-6. Supporters said the refinancing and infusion of capital is likely the project's only path to completion; opponents argued the board was being asked to put the city's interest behind a private lender and worried about repeat refinancing down the road.
What the subordination does not change: the city's covenant remains recorded; the subordination changes priority on insurance proceeds to allow a lender to be in first position. Attorney Lano said the lien is limited in scope, triggers only on casualty-related insurance proceeds and expires under the recorded covenant five years after an unconditional certificate of occupancy.
Ending: Board members asked that lien releases and closing documents be provided as soon as possible; proponents said they expect subcontractor lien releases to be recorded next week as part of closing steps and that construction financing and inspections will govern future disbursements.
