Condition subsequent
What is a condition subsequent in a loan agreement?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A condition subsequent is something a borrower must do or deliver within a set period after the facility has been drawn — a security registration still in process at drawdown, an updated valuation, insurance noting the bank's interest, the first audited accounts. The bank has lent on the promise, so missing the deadline is a breach in its own right, and usually an event of default once any cure period has run. Conditions subsequent let a deal close on time without the bank giving up what it approved; their weakness is that nobody diarises them.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// WHAT IT IS NOT
A condition subsequent is not a condition precedent: a condition precedent must be met before the first drawing, a condition subsequent within a deadline after it.
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