Subordination, Non-Disturbance & Attornment (SNDA)

A Subordination, Non-Disturbance, and Attornment (SNDA) agreement is a tripartite contract between a commercial landlord, their tenant, and the landlord’s lender that governs the legal relationship between a lease and a mortgage. The 'Subordination' component ensures the lease is junior to the mortgage lien, while 'Non-Disturbance' protects the tenant by guaranteeing their right to occupy the premises if the lender forecloses, provided the tenant is not in default. Finally, 'Attornment' requires the tenant to recognize the lender or a successor owner as the new landlord following a foreclosure. This document is essential for clarifying rights and obligations in the event of a financial default by the property owner.

In commercial real estate transactions, lenders typically require an SNDA as a condition for funding a loan secured by income-producing property. During the due diligence or loan closing process, the lender’s counsel will draft the SNDA and request that the landlord obtain signatures from key tenants. For example, a lender financing a multi-tenant retail center will prioritize obtaining SNDAs from anchor tenants to ensure the mortgage has priority while stabilizing the asset's cash flow. Brokers and sponsors must facilitate this tripartite negotiation to ensure the lease terms remain intact while satisfying the lender’s risk mitigation requirements, thereby ensuring the property remains a viable collateral asset throughout the loan term.

The SNDA is critical because it balances the competing interests of lenders and tenants, providing stability to the commercial real estate ecosystem. For lenders, subordination ensures their lien remains superior, while attornment guarantees that rental income—the primary source of loan repayment—continues after foreclosure. For tenants, the non-disturbance clause provides vital business continuity, protecting their investment in leasehold improvements and preventing sudden eviction due to a landlord’s financial failure. Without an SNDA, a foreclosure could legally terminate a lease, creating significant risk for both the tenant’s operations and the lender’s recovery value. This agreement effectively de-risks the investment for all parties involved in the capital stack.