The SNDA

A Subordination, Non-Disturbance and Attornment Agreement (commonly referred to as an SNDA) is a somewhat infrequently used, but highly recommended, arrangement among a tenant, a landlord and a lender. It is intended to provide some protection to both the tenant and the landlord’s lender. The provisions of an SNDA usually take effect upon a default by the landlord under its loan and mortgage and generally provides that (i) the tenant will subordinate its lease to the mortgage, (ii) the lender will not disturb the tenant if it does foreclose on the landlord’s property, and (iii) the tenant will attorn to the lender (ie. acknowledge its relationship with the lender as its new landlord).

As a tenant, whether you lease commercial, industrial or retail space, an SNDA could be a great way for you to hedge any risk relating to your landlord’s financial failure. Without the protection of an SNDA, after any foreclosure by your landlord’s mortgage holder, you may find yourself looking for new space, as the landlord’s mortgage holder is probably not obligated to uphold your lease. A properly drafted SNDA will require the landlord’s mortgage holder to become the landlord under your lease.

As a landlord, a properly drafted SNDA will have little or no consequence to you. The concern for the landlord with respect to an SNDA is over-estimating its ability to have its lender actually agree to give an SNDA to any given tenant. It is likely that your loan documents do not require your lender to provide an SNDA, so a landlord should be careful in making a promise to provide an SNDA to its tenant – perhaps better options are obtaining the SNDA prior to lease execution or promising only to make an attempt to obtain an SNDA from the lender.

As a lender, agreeing to an SNDA necessitates an understanding and degree of comfort with the lease itself (as the lender may inherit the obligations of the landlord upon a foreclosure).

With the recent increase in foreclosures, the SNDA could be an important document for your business, whether you are a tenant, a landlord or a lender. We strongly suggest that you engage competent legal counsel to negotiate and/or prepare that document.