An often overlooked standard boilerplate lease provision, relating to subordination, non-disturbance and attornment agreements (SNDAs), can become of critical importance to tenants, landlords and landlord’s lenders in the event the subject property is sold, refinanced or foreclosed upon during the lease term.

In this regard, let us take a closer look at what is an SNDA and why does it matter?

Typically, the SNDA is an agreement between the tenant, landlord and landlord’s lender containing three of the following clauses:

1. A subordination clause
2. A non-disturbance clause
3. An attornment clause

All three clauses come into play in the event a lender pursues a foreclosure on its security interest (typically a mortgage lien) on the property following a default by the landlord under its loan. Under the subordination clause, the tenant agrees that its lease is subordinate to the lender’s lien on the property, effectively allowing the lender to foreclose its mortgage in the event the landlord defaults under the mortgage loan. Under the non-disturbance clause, so long as the tenant is in compliance with its lease, the lender agrees not to “disturb” the tenant’s rights under the lease in the event the lender forecloses its lien following a default by the landlord under the mortgage loan. Under the attornment clause, the tenant agrees to “attorn to” or recognize the lender or any subsequent purchaser as the tenant’s new landlord, requiring that the tenant continue paying rent to the new landlord throughout the remainder of the lease even if the property is foreclosed or sold.

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