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Tenants don’t have to fear their property going into receivership
The rising number of receiverships is bringing to light new information on a lease clause that received almost no attention during the industry’s best years: subordination, non-disturbance and attornment (SNDA) agreements. These agreements protect both lenders and tenants in the event that a lender forecloses on a property or moves to have a receiver named.
The SNDA agreement is actually three clauses in one:
• The subordination clause is one in which a tenant agrees that its lease is subordinate to the mortgage on the property, or that a lender’s interests come first if a landlord runs into trouble.
• The non-disturbance piece is a guarantee from the lender that in the event of a foreclosure it will not disturb a tenant’s occupancy and will recognize the rights of the lease.
• The attornment piece of the clause is an agreement by the tenant that if a lender forecloses, the tenant will recognize the lender or a court-appointed receiver as the new landlord.