While a SNDA and an Estoppel Certificate are usual and customary components to a commercial real estate transaction, their use may be foreign to first time buyers, sellers, or agents. A “SNDA” is an acronym for a Subordination, Non-Disturbance and Attornment Agreement. Use of a SNDA most often arises in commercial real estate transactions in which there is one or more tenants occupying the property under written leases.
- an Estoppel Certificate, and
- a Subordination, Non-disturbance and Attornment Agreement
- the term of the lease
- the amount of the lease payments and that lease payments are current
- is there a security deposit
- are there any non-monetary defaults (obligations of the tenant (or landlord) under the lease that either party has failed to perform), and
- otherwise confirm material terms of the lease
- In the “subordination” part of the agreement, the tenant agrees to treat the lease as if it came after the mortgage even though the lease was executed before the mortgage. This subordination allows the lender to terminate the lease in the event of a foreclosure. In exchange for the subordination, the lender agrees not to disturb the tenant’s right to possession, provided the tenant is not in default under the lease.
- The “non-disturbance” agreement permits the tenant to stay on in the event the lender or other purchaser at a foreclosure sale takes title to the property that is subject to the lease.
- And, the “attornment” portion of the agreement obligates the tenant to recognize the lender or purchaser at a foreclosure sale as the new landlord. Usually, the attornment is only given by a tenant if the lender agrees to the non-disturbance (sometimes called a “right of quiet enjoyment”) agreement.