Commercial Lease – Subordination and Non-Disturbance Agreements

Updated on August 15, 2018

A subordination, non-disturbance, and attornment agreement, commonly known as a “SNDA” is an agreement that addresses lien priorities as between tenants and lenders. These SNDA set out when the rights of the tenant will be subordinate (junior) to the rights of the lenders. The overall purpose of a SNDA agreement is to assure a tenant that their rights in their lease and the leased premises will not be disturbed even if the landlord defaults on its loan and the commercial lender forecloses on the property.

The attornment agreement, in turn, typically provides that the tenant will continue their obligations under the lease even in the event a new landlord takes over the contract. This assures the lender that there will be privity of contract following a foreclosure.

SNDA agreements and in particular the subordination agreement are very important to commercial lease tenants who need to protect their interest in a commercial lease. For example, a large anchor tenant in a mall or strip mall will want to have assurance from the lender that if their landlord defaults on the loan for the leased premises, mall or strip mall, the tenant will still be able to carry out its business. Without such an agreement, the tenant also bears part of the risk of the landlord’s default on its loan with its lender.

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