An often-overlooked administrative procedure common to most commercial real estate transactions is gaining new significance, influencing deals in unexpected ways. Known as the SNDA, or Subordination, Non-Disturbance, and Attornment Agreement, this process is being utilized by tenants and lenders in novel ways that can potentially delay or even derail transactions, according to one expert who handles hundreds of these deals every year.
An SNDA is an agreement between a landlord's lender and a tenant. It ensures that if the lender takes over as the landlord, the lease remains subordinate to the mortgage, yet the tenant's rights are protected. This agreement is vital because, in some states, a tenant's rights can automatically supersede a new mortgage, potentially jeopardizing the lender's position. The SNDA solidifies the mortgage holder's rights, providing clarity and security.
The agreement comprises three main components. First is subordination, which places the lease below the lien of any mortgage on the property, ensuring the lender's priority. Next is non-disturbance, which promises that the tenant's possession of the property won't be disrupted if the lender forecloses. This aspect is crucial, as some state laws might otherwise allow a mortgage holder to terminate leases during foreclosure.
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