Subordination, Non-Disturbance, and Attornment Agreement (SNDA)

Subordination, Non-Disturbance, and Attornment Agreement (SNDA)

A Subordination, Non-Disturbance, and Attornment Agreement (SNDA) is a legal document often utilized in real estate transactions that establishes the relationship between a landlord, tenant, and lender regarding a lease and the underlying mortgage on the property. This agreement serves to protect the rights of all parties involved, particularly in situations where the property may be foreclosed or sold.

Subordination refers to the process by which a tenant agrees that their lease will be subordinate to the rights of a lender who holds a mortgage on the property. This means that if the landlord defaults on the mortgage, the lender’s rights take precedence over those of the tenant. By executing an SNDA, the tenant acknowledges that their lease will not interfere with the lender’s claim to the property, thus allowing the lender to proceed with foreclosure or other remedies without regard for the tenant’s lease.

Non-Disturbance is a critical component of the SNDA that ensures tenants can continue to occupy the property even in the event of the landlord’s default and subsequent foreclosure. The lender agrees not to disturb the tenant’s right to occupy the premises as long as the tenant is compliant with the lease terms. This provision provides security to tenants, as they can maintain their leasehold interests despite changes in property ownership.

Attornment involves the tenant’s acknowledgment of the lender or a new property owner as their new landlord in the event of foreclosure. Through attornment, the tenant agrees to continue paying rent to the new owner rather than the original landlord, facilitating a smoother transition in ownership and ensuring that the terms of the lease remain enforceable.

For example, if a tenant has a lease in a building that is mortgaged and the landlord defaults, the SNDA allows the lender to foreclose on the property while ensuring that the tenant can remain in the property under the original lease terms. The tenant would agree to recognize the lender as their landlord if the lender becomes the new owner, thus preserving the tenant’s rights and usage of the space.

In summary, an SNDA is essential in commercial real estate transactions, providing clarity and protection for tenants, landlords, and lenders by clearly delineating the rights and responsibilities of each party in relation to the property and its lease.