Tuesday, December 6, 2011

Real Estate 101: SNDA Agreements

What is an SNDA agreement? “SNDA” stands for a Subordination, Non-Disturbance and Attornment” agreement. It is essentially 3 agreements in one that addresses the priority of rights between a tenant and a lender to the tenant’s landlord. It is an agreement that is often overlooked, to the detriment sometimes of the tenants and/or the lenders.



Subordination
The subordination portion of an SNDA addresses how and when a tenant’s rights under its lease with the landlord will be subordinated to the rights of the lender. This can be crucial to a new lender whose liens might otherwise be junior to those of a pre-existing tenant under its lease agreement.


Non-Disturbance
The non-disturbance portion of an SNDA is intended to protect the tenant in the event of a landlord default that results in the lender foreclosing on the leased property. It permits the lease to remain in place so long as the tenant is not in default under the lease.


Attornment
The attornment portion of an SNDA is essentially the flip side of the non-disturbance agreement. If a non-disturbance agreement requires the landlord to keep the lease in force so long as the tenant is not in default, under the attornment agreement the tenant is agreeing that it will recognize the lender/mortgagee as landlord.


It is not uncommon for some of these provisions to be incorporated by a landlord into its form lease agreement, particularly the subordination and attornment provisions. However, a tenant, particularly one who is investing significant money into new lease space, will want to see a non-disturbance agreement included as well. How much a tenant can obtain in negotiating any non-disturbance agreement will depend on the strength of a tenant’s bargaining power.


While these provisions, or some of them, can be incorporated into a lease, my personal preference (particularly when I represent a tenant) is to negotiate a separate SNDA agreement that is signed by all three parties, the tenant, the landlord and the landlord’s mortgage lender. I would not want to risk the provisions being extinguished as part of the lease in a foreclosure. It is also not a bad idea, particularly if you are the tenant, to require the right to record the SNDA agreement.

4 comments:

Bose said...

I really liked your blog post.Really looking forward to read more. Much obliged.Agreements

Stew said...

It's always important between tenants and landlords to create and sign-off an agreement detailed in those 3 sections mentioned here. Those are very interesting points that I would like to explore as right now I am looking for houses for rent in Cincinnati Ohio area.

New Punggol Condominiums said...

Wow, this is pretty interesting. Inspiring, as well. Thanks for sharing such inspiring experience with us. Great blog, congrats.!

New Punggol Condominiums said...

Wow, this is pretty interesting. Inspiring, as well. Thanks for sharing such inspiring experience with us. Great blog, congrats.!