Form of Subordination Non-Disturbance and Attornment Agreement

A form of subordination non-disturbance and attornment agreement (SNDA) is a critical document in commercial real estate transactions. It clarifies the relationship between a tenant, landlord, and a new lender in the event of a mortgage on the property. In this article, we`ll examine the different elements of an SNDA agreement and why it`s essential for all parties involved.

What is an SNDA Agreement?

An SNDA agreement is a legal document that outlines the rights and responsibilities of a tenant, landlord, and a new lender in case of a mortgage on the property. The three significant elements of an SNDA agreement are:

1. Subordination: This section of the agreement specifies that any mortgage that the landlord obtains on the property will be subordinate to the lease agreement between the tenant and the landlord. This means that if the property associated with the lease agreement goes into foreclosure, the mortgage lender will have a lower priority claim on the property than the tenant.

2. Non-Disturbance: This part of the agreement ensures that the tenant`s lease agreement remains in effect even if the property goes through a foreclosure proceeding. This ensures that the tenant can continue to operate their business as usual, and their lease will not be affected by the landlord`s financial issues.

3. Attornment: This section of the agreement requires the tenant to recognize and accept the new owner of the property, whether it`s the landlord or a new lender that acquires the property through foreclosure.

Why is an SNDA Agreement Important?

An SNDA agreement is crucial to protect the interests of all parties involved in a real estate transaction. For the tenant, the non-disturbance clause ensures that their business operation will not be disrupted by changes in ownership of the property. The subordination clause helps the tenant understand the priority and status of their lease agreement in case of a foreclosure.

For the landlord, an SNDA agreement provides the flexibility to obtain financing without worrying about the lease agreement`s impact on the loan. It also helps ensure that the lease agreement remains in effect, which can be beneficial for negotiating new leases or renewals.

For the lender, an SNDA agreement provides protection for their investment, as it helps ensure that the tenant remains in business and that the lease agreement remains in force. This can help improve the value of the property and increase the chances of the lender recouping their investment.

Conclusion

An SNDA agreement is an essential document in commercial real estate transactions, as it protects the interests of all parties involved. The agreement specifies how a tenant`s lease agreement will be affected in case of a foreclosure proceeding and ensures that the lease remains in effect, protecting the tenant`s business operation. The agreement also provides flexibility for landlords to obtain financing and helps protect a lender`s investment. Ultimately, an SNDA agreement is crucial to ensuring a successful and secure commercial real estate transaction.