An SNDA — subordination, non-disturbance, and attornment agreement — is a three-party document signed by a tenant, the landlord, and the landlord's mortgage lender. It sets the priority between the lease and the mortgage and, critically, ensures that the tenant's lease will continue to be honored even if the landlord defaults and the lender forecloses. Without an SNDA, a foreclosure can wipe out the lease entirely.
The three parts work together. 'Subordination' means the tenant agrees that the lender's mortgage takes priority over the lease — this is what the lender requires to make the loan. 'Non-disturbance' is the lender's promise that, in exchange, the lender will not terminate the lease if the lender forecloses. 'Attornment' is the tenant's agreement to recognize the lender (or whoever takes over the property after foreclosure) as the new landlord and continue paying rent.
Institutional tenants — major retailers, anchor office tenants, large industrial users — almost always require SNDAs as a condition of signing any meaningful commercial lease. The reason is straightforward: a tenant investing significant capital in build-out, fixtures, and operational continuity can't afford to lose its space if the landlord's financial situation deteriorates. The SNDA converts a contingent risk into a contractual protection.
Negotiating an SNDA matters because the lender's standard form usually favors the lender. Tenants typically push back on terms allowing the lender to terminate certain lease modifications, on cure periods that ignore tenant pre-existing rights, and on subordination of personal property and tenant improvements. The level of negotiation depends on the tenant's leverage — credit tenants get more protection than smaller tenants in the same building.
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