The “Attornment” part of the agreement, which is perhaps the most confusing part of an SNDA, simply means that the tenant agrees to recognize the buyer as a new owner under the lease upon the forced sale. This is only one way to formalize the legal relationship between an owner and the new owner of the property. A subordination is a contractual agreement of the tenant according to which his lease shares in the security or part of it (the subject of the lease) are subordinated either to the mortgage or to the right to guarantee the mortgage. This property is important because if a tenant is itself subject to the mortgage, then the tenant is bound by the terms of the mortgage which may differ from the terms of the tenancy agreement. Otherwise, if a tenant is only subject to the right to guarantee the mortgage, only the tenant`s property is subordinated and, therefore, the leasing provisions are controlled subject to all the provisions of the SNDA. The short answer is “very.” The landlords do not give these agreements mainly because they go to their lender and say, “If I sink and you take over, are you going to do me a favour and honour a particular lease or lease in the building?” Lenders often don`t say yes to this and therefore hate landlords to ask. But they become if the tenant has enough levers, the landlord wants the deal pretty bad, or if the landlord knows that the lender will unsubscribe. An SNDA – in short for subordination, non-interference and attornation agreement – is a tripartite agreement between a tenant, an landlord and the lender of the lessor. The SNDAs govern the relationship between the tenant and the lender in the event of the lessor defaulting on its loan documents and subsequent forced execution by the lender. In the absence of SNDA, the relative priorities of the tenant and lender and the consequences of forced selling are controlled by state registration laws, the right of state silos and applicable common law principles.
As the name suggests, an SNDA is really three chords, all packaged in an ordinary package. The three aspects of the SNDA only come into play if the leased property is isolated by a lender holding a portion of the securities (mortgages or trust receipts) guaranteed by the lease. Let`s first look at the “subordination” part of the SNDA. If the lease agreement exists at the time of registration of its security interest in the property, the lease is greater than the security interest and, in the event of embezzlement by the lender, the title acquired by the buyer at the time of the forced sale is subordinated to the existing lease agreement or is submitted to it. When a tenant signs an SNDA, the tenant agrees to reverse the priorities and outcome during the enforcement; that the lender`s security interest exceeds the existing lease and that the security purchased by the purchaser at the time of the forced sale exceeds the level of credit in force after being transferred by the lender. Such a change in priority is essential for the lender, since the lender or other forced sale buyers would have the right to terminate the lease after the enforcement because of its best interest, in the absence of a dysfunctional agreement. In return for a tenant`s agreement to subordinate his lease to the lender`s trust company, the taker should say that, in the event of a foreclosure, the lender does not interfere with the tenant (and a third-party buyer at the time of the forced sale) the tenant`s ownership interest in the terms of the tenancy agreement.