Subordination Non-Disturbance and Attornment Agreement (SNDA): What You Need to Know
If you`re a property owner or a tenant, you`ve likely come across the term “Subordination Non-Disturbance and Attornment Agreement” or SNDA. This legal document is an essential part of any real estate deal involving a commercial property, and it`s important to understand what it entails.
What is an SNDA?
An SNDA is a legal agreement between a landlord, a tenant, and a lender. The document sets out the terms and conditions under which the tenant`s lease will be subordinated to the lender`s mortgage, and the lender agrees not to disturb the tenant`s right to occupy the premises in the event of a foreclosure.
SNDA`s are very common in commercial real estate, where lenders will want to ensure they can foreclose on a property without disrupting a tenant`s business operations.
What Does Subordination Mean?
In the context of an SNDA, subordination means that the tenant agrees to subordinate their lease to the lender`s mortgage. This means that in the event of a foreclosure, the lender has the right to evict the tenant and terminate the lease.
For a tenant, subordination can be risky since it means their lease is subordinate to the lender`s rights. However, the SNDA usually requires the lender to recognize the tenant`s rights and not disturb their possession of the property.
What Does Non-Disturbance Mean?
Non-Disturbance means that the lender agrees not to disturb the tenant`s right to occupancy, even if the landlord defaults on the mortgage. This means that the lender cannot evict the tenant nor disturb their ability to operate their business on the leased premises.
The non-disturbance protection in an SNDA is important for the tenant since it ensures they can continue to occupy their space even if the landlord defaults on the mortgage.
What is Attornment?
Attornment refers to the tenant`s obligation to recognize a new owner of the property as their landlord, should the property be sold or the landlord`s interest be assigned to another party. Attornment is important for the lender since it can help them sell the property in the event of foreclosure.
Why Do You Need an SNDA?
An SNDA is essential for both tenants and lenders as it protects their interests in the event of a foreclosure. The SNDA ensures that the tenant can continue to occupy the leased premises, even if the landlord defaults on the mortgage. It also ensures that the lender can sell the property without disrupting the tenant`s operations.
Conclusion
In conclusion, if you`re involved in a commercial real estate deal, it`s important to understand the significance of an SNDA. The SNDA is a legal document that protects the interests of the tenant, landlord, and lender by setting out the terms and conditions under which the lease can be subordinated to the mortgage, and the tenant`s right to occupancy can be protected. Always consult with an attorney experienced in real estate law to ensure that your interests are protected.