Subordination, Nondisturbance & Attornment (SNDA)

A Subordination, Nondisturbance, and Attornment Agreement (SNDA) is a tripartite agreement among a tenant, landlord (borrower), and the landlord's lender. In essence, it clarifies the rights of the tenant against the lender should the landlord default on their loan and the lender forecloses. 'Subordination' means the tenant's leasehold interest is junior to the lender's mortgage. 'Nondisturbance' protects the tenant, ensuring their occupancy rights are undisturbed as long as they adhere to the lease, even after foreclosure. 'Attornment' obligates the tenant to recognize the lender (or subsequent owner) as their new landlord.

As a commercial real estate broker or lender, understanding SNDAs is crucial during underwriting and loan closing, particularly for properties with significant in-place tenancy. When evaluating a potential loan, you'll often request and review SNDAs to ensure the stability of the property's income stream. For a borrower, securing SNDAs from key tenants can be a condition precedent to funding, as it provides comfort to the lender that rental income will continue post-foreclosure. Brokers should advise clients on the importance of negotiating SNDAs with anchor tenants to enhance property value and financeability.

The SNDA is vital for mitigating risk for both lenders and tenants, directly impacting a property's financeability and value. For lenders, it safeguards the income-generating capacity of the collateral by preventing tenants from vacating if the landlord defaults, thus preserving the property's cash flow. For tenants, especially those with significant build-outs or long-term commitments, it provides critical assurance that their business operations won't be disrupted by a landlord's financial distress. For brokers, a property with robust SNDAs in place for its major tenants is a more attractive and less risky investment, commanding better financing terms and potentially higher valuations.