United States: Real Insights On Real Estate: How To Review An SNDA (Video)

Last Updated: May 8 2017
Article by David W. Adams

How to Review an SNDA

Welcome to another "Carlton Fields Real Insights on Real Estate" podcast. Today we're going to talk about an issue that is often glossed over in real estate transactions -- the subordination, non-disturbance and attornment agreement and how to review it from the perspective of a lender.

Joining us to discuss the SNDA and the real estate business is David Adams. David is an attorney who represents national, regional, and community lenders in a wide variety of regulatory and financial matters. He has extensive experience in the areas of the regulation of financial institutions; the acquisition and sale of business entities, and the financing of various transactions.

When reviewing an SNDA from the lender's perspective, a reviewer's goal in negotiating an SNDA is to try to limit the lender's lease obligations as much as possible, while conversely the tenant endeavors to protect as many of the rights it negotiated in the lease agreement. And, although the lender will generally agree not to disturb the tenant's possession of the premises if the tenant is not in default, the list below indicates the most important items that lenders want outside counsel to review in any SNDA form, and which should be negotiated by tenant.

Of course, before diving into the details of any SNDA it is important to make sure that the SNDA (and to a lesser extent the subject lease) actually does the three things in its name: (1) subordination; (2) non-disturbance; and (3) attornment.

Sometimes the lender will leave off the non-disturbance portion of the agreement, as the lender is only interested in the subordination and attornment. The purpose of the subordination and attornment agreement is to protect the lender in the event of a default under the mortgage and/or foreclosure of the mortgage so that the lender has the ability to collect rents (often through a rent receiver), and if foreclosed, permit the lender or purchaser at the foreclosure to take possession of the property and step into the shoes of the landlord under the lease.

1. Subordination. A subordination is a contractual agreement by the tenant that its leasehold interest in the collateral property, or portion thereof, is subordinate either to the mortgage or to the lien of the mortgage. This distinction is important because if a tenant subordinates to the mortgage itself, then the tenant will be bound by the terms of the mortgage, which may be contrary to the terms of the lease. Alternatively, if a tenant subordinates only to the lien of the mortgage, then only the tenant's possession is subordinated, and thus the lease provisions will control, subject to any provisions set forth in the SNDA.

2. Non-disturbance. Non-disturbance, as the word implies, is a contractual agreement by the lender not to disturb tenant's possession of the premises under the lease in the event of a foreclosure. At its most basic level, a tenant should require a non-disturbance agreement from a lender in any situation in which the tenant is agreeing to subordinate the lease to the lien of the loan. Tenants are also well advised to seek a non-disturbance agreement unilaterally from any existing lender when the tenant is entering the lease, since the lease automatically would be subordinate to the lien of the loan by virtue of being chronologically behind the lien. Lenders are generally willing to grant non-disturbance to a non-defaulting tenant in return for contractual subordination of the lease to the lien of the loan.

3. Attornment. Simply put, in the context of an SNDA, an attornment is the technical process by which the tenant agrees to recognize the lender, or the foreclosure transferee if not the lender, as the new landlord under the lease after the foreclosure is completed. It is this process that creates the direct privity of contract between the lender or other foreclosure transferee and the tenant under the lease.

In addition to the three items above, there are several other items that lenders should pay very close attention to in both the lease and the SNDA review process. When a lender is reviewing a lease or an SNDA, the reviewer should keep in mind that the review is not only for things that may affect a borrower's ability to pay the loan, but also for obligations a lender may step into if – and when – it becomes a landlord. Just like there can be different lease forms, there is no one-size-fits-all approach to reviewing an SNDA.

Below are some questions that a lender should ask when reviewing leases to understand what obligations the lender may step into if and when it steps into the shoes of a borrower/landlord.

Is the lease complete? Ensuring that all of the documents were actually signed, signed by the correct tenant legal entity, and that the lease relates to the correct premises are preliminary steps, but are important items to confirm. Further, the lender should confirm that all copies of leases include all exhibits and amendments. These could affect the financial terms of the lease, the length of the lease, and other important financial matters.

What is the lease term? When does the lease expire and what extension/renewal rights does the tenant have? If tenant has a renewal option, purchase option or other option, the lender should confirm that borrower/landlord has sufficient notice of tenant's intent to exercise or not exercise its renewal option so that the borrower/landlord still has enough time to re-let the space without risk of interruption in rent.

What is the rent? Together with verifying the rent in the borrower/landlord-provided rent roll, the lender will want to understand whether there are any free rent periods. The lender will also want to understand whether there are any significant exclusions from operating expenses or taxes that form part of the additional rent. Commercial leases will often contain a provision allowing a tenant the right to "abate" rent: to stop paying all or a portion of rent for a period of time. The tenant may also have a "self-help" right: the right of the tenant to cure the landlord's default and offset the costs against rent. A lender will want to understand the tenant's right to self-help and set-off, especially if the borrower/landlord is not maintaining the property.

Are there tenant improvement obligations? Where a building is under construction, or as a tenant inducement, the borrower/landlord may have obligations under the lease to pay for construction or improvements. The lender should ensure that it understands the costs of these obligations, the tenant's remedies for late delivery, and whether the lender would be liable for the borrower's/landlord's failure to provide a tenant improvement allowance.

What are the termination rights? Lenders concern themselves about the effect that a tenant's termination right may have on a borrower's ability to meet debt service obligations. Tenant termination rights could arise from several provisions in a lease: landlord's breach of a restrictive use covenant; landlord's failure to complete leasehold improvements timely; landlord's failure to make major repairs; or landlord's failure to restore the demised premises soon enough after a casualty. The lender should also review the landlord's termination rights as this will help assess the flexibility a lender may have upon enforcing a lease if it steps into the shoes of the borrower/landlord. Further, the lender should understand cure rights for a landlord default that may help to preserve a favorable lease.

Is there a "go dark" or "co-tenancy" provision? The lender should understand landlord's rights if a tenant closes its doors and ceases operations. Although the tenant will typically be required to continue paying rent if it goes dark, the collectability of rent may be in doubt. Another question a lender should ask is what impact does a "going dark" provision have on other tenants in a multi-tenant property should the tenant exercise this right. If it is an anchor tenant, the other tenants may rely heavily on the anchor being open so as to generate traffic in the property and business. The lender should also determine whether the lease contains a "co-tenancy" provision. These provisions allow a tenant to exercise specified remedies if certain conditions regarding the presence and operation of other tenants in the building are not met. The lender should understand the impact a co-tenancy provision could have on the entire property if any one tenant's closure or failure occurs within the property.

What are the landlord's obligations to rebuild or restore? The obligation to rebuild or restore after a casualty usually falls on the landlord's shoulders. This can be an extremely expensive undertaking for a landlord, especially if insurance coverage is inadequate. Another related area is understanding when and how the lease allows a Tenant to abate rent after a casualty. An insurance review cannot be understated. While many of the items will happen if the appropriate number of angels dance on the appropriate pin head, insurance claims ways occur at the worst possible moments. If a reviewer does nothing else, it should complete a thorough insurance review.

Are there rights of first refusal or first offer? These tenant rights can limit a landlord's ability to lease vacant space. In multi-tenant buildings, tenants with these rights may be entitled to notice when other spaces become available in the building and a landlord may not be able to offer vacant spaces to desirable tenants without first offering it to existing tenants holding these rights.

Is the lease self-subordinating or is there a requirement for a subordination, non-disturbance and attornment agreement (SNDA)? The SNDA subordinates a lease to the lender's security interest in the property. This subordination is usually given by tenants in exchange for a promise by the lender not to disturb the leasehold rights of the tenant in the event of foreclosure as long as the tenant is not in default of its lease. As mentioned above, a key provision for lenders in the SNDA is "attornment," which provides that in the case of a foreclosure, the tenant will attorn to (recognize) the lender (or the buyer at a foreclosure sale) as the new landlord under the lease with all the same rights of the prior landlord. A lender will want to be sure that any tenant that has an interest in the property that is earlier than a new mortgage is obligated in its lease to provide an SNDA in connection with the new mortgage.

Is the tenant obligated to provide an estoppel certificate? Many leases provide that either landlord or tenant will execute an estoppel certificate upon request of the other. The estoppel gives a lender notice of existing issues in the landlord-tenant relationship and any defaults by either party that might need to be cured. A lender should confirm whether the leases require tenants to provide estoppel certificates. The lender should review the estoppel certificate to be sure there are no unexpected issues with the property or the relationship between landlord and tenant that would prove costly to resolve by the landlord, or later by the lender if a foreclosure becomes necessary.

In most cases a SNDA will be an ancillary document in a financing or leasing transaction. Normally, the need for a SNDA will arise as one of a lender's closing conditions for funding a loan. Certain tenants may also request a SNDA as a closing condition or post-closing obligation to be satisfied by its landlord in a leasing transaction, but this is less common. Since a SNDA will not be one of the primary documents in a loan transaction, there is sometimes a tendency for the landlord and lender to treat it as an innocuous "checklist" item and wait until late in the transaction to circulate the lender's form to any tenants. But commercial tenants should not let the attitude of their landlord or its lender towards SNDAs, or any last minute rush, fool them. The stakes are high and tenants should carefully review the terms of a SNDA with counsel before signing.

The above items highlight just a few of the commercial lease provisions that lenders should look for when reviewing leases not only for items that may affect the borrower's ability to pay the loan but also for obligations on the lender if – and when – it becomes a landlord.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions