3.25.2011
The ABCs of SNDAs
If Subordination, Non-Disturbance and Attornment Agreements (SNDA) were called something more exciting, perhaps lenders, landlords and tenants would have given them greater attention during the real estate bubble.
Instead, SNDAs suffer from such a tedious name that there should be no surprise that many commercial tenants sign them without much thought.
Landlords typically include subordination provisions in their commercial leases to reserve the possibility of using their properties as collateral for financing. These provisions generally place the priority of the lease behind any mortgages, and provide that, if requested by the landlord, the tenant will sign a separate agreement known as an SNDA.
An SNDA consists of three basic components. First, the tenant agrees that the lender’s mortgage lien has priority over the lease and that if the lender forecloses its mortgage lien, the lease may be wiped out. Second, the lender agrees to not disturb the tenant’s possessions if the lender forecloses. Third, the tenant agrees to recognize the lender, or any successful purchaser at a foreclosure sale, as the tenant’s new landlord.
An SNDA survives foreclosure, so the lender (or successful purchaser), is bound by its terms.
This article first appeared in Puget Sound Business Journal.