The Subordination, Non-Disturbance and Attornment Agreement, commonly referred to as an “SNDA” is one of most the often overlooked and least understood agreements in a commercial real estate financing transaction. The SNDA is confusing to most real estate professionals and many lawyers who are not skilled in commercial real estate transactions. Most commercial leases contain a provision whereby the tenant agrees to provide its landlord an SNDA upon request, and commercial borrowers are required to obtain SNDAs from its commercial tenants as a requirement for commercial real estate financing. But what is it?
The SNDA is an agreement among the mortgage lender, property owner borrower, in its capacity as landlord, and the borrower’s commercial tenant. The SNDA establishes the parties’ rights should the borrower become in default of the loan documents with the mortgage lender and the lender becomes the landlord.
It is important to know what each part of the SNDA means before analyzing the importance to each party involved.
“Subordination” is where the tenant agrees that its lease agreement with the borrower landlord is subordinate to the mortgage. In other words, the lien of the mortgage is superior to the lease agreement.
“Non-Disturbance” is where the lender agrees not to disturb the tenant’s possession of the leased premises following a foreclosure, or when the mortgage lender otherwise takes possession, title or control of the property where the lease is a part.
“Attornment” means the tenant agrees to “attorn to” and accept the lender as the landlord following a foreclosure or other situation where the lender takes possession, title or control of the property where the lease is a part.
The SNDA has potential benefits and pitfalls. Next week we will analyze the import from each parties’ perspective.
ABOUT JAMES LANDON
Jim Landon has practiced real estate law since 2002 and has been involved in real estate investment and construction for most of his life. Jim’s practice focuses on real estate transactions and land use.
Jim represents individuals and privately and publicly held companies in the purchase, sale, leasing, financing, and development of real property. He also represents title insurance companies on commercial purchases and refinancing transactions, as well as providing third-party legal opinions regarding Delaware law related to Delaware entities.
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