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SNDA: What’s That?

SNDA: What’s That?
As a requirement of most lease agreements Tenants are asked to agree to a form of SNDA= SubordinationNon-Disturbance, and Attornment Agreement.  While the title sounds daunting the agreement is simply a confirmation of the relationship between the Tenant and the Lender (Bank etc.) should the Landlord default on their loan. Most of a lease agreement describes the relationship between the Tenant and Landlord. The SNDA, which is typically attached to the lease as on exhibit, simply describes “who is boss” between Tenant and Lender should the Landlord disappear (default on note). The three parts to this agreement/relationship are as follows:

Subordination: The Lender lends Landlord (Owner) lots of $’s with the property as the collateral. To be safe, the Lender certainly records his loan (deed) in the public record. Tenants can also record their lease agreements in the public record. For Lenders to easily underwrite their loans they can not have a Tenant “in line” in front of them with rights to the property. So this part of the agreement has Tenants acknowledge their leasehold interests are “subordinate” to the Lender’s security interest in the property.

Non-Disturbance: “Wait a minute” says the Tenant “I am not OK putting the Lender ahead of my interests- if my Landlord defaults I can get tossed out even if I pay my rent.”  So, to protect the Tenant the agreement includes a “Non-Disturbance” provision wherein if the Landlord defaults the Lender, even though they have a 1st security interest in the property, cannot disturb the Tenant if they take the Property back from the defaulted Landlord.

Attornment: “But wait another minute” the Lender says, “I foreclosed on this deadbeat Landlord, and I need this Tenant (that I can not throw out per the above) to pay me rent as I am the new Landlord by default.” So, this third piece of the SNDA has the Tenant agree to “Attorn” to the Lender, meaning they still have to pay rent and can not walk away from their lease because of the foreclosure.

The SNDA Agreement is not used very often but when it is both the Lender and the Tenant benefit knowing rules are already in place.

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