Ensure tenants can stay if property is sold: Lease Subordination Agreement
What is a Lease Subordination, Non-Disturbance, and Attornment Agreement?
A Lease Subordination, Non-Disturbance, and Attornment Agreement (SNDA) is a legal document that provides protection for tenants in the event of a landlord default. It helps ensure that the tenant can remain on the property during the term of the lease, even if the landlord is no longer able to fulfill their obligations.
As the name suggests, an SNDA consists of three tenant agreements. The Subordination Agreement allows the tenant to subordinate their rights over the property to the rights of the mortgage lender in the case of landlord default. The Non-Disturbance Agreement guarantees that the lease continues if the property is involved in a foreclosure. Lastly, the Attornment Agreement requires the tenant to recognize the mortgage lender as their new landlord if the property undergoes foreclosure.
By using an SNDA, landlords can assure potential tenants that they can stay in the property for the duration of their lease, even if the property is sold or foreclosed. This can make the property more attractive to tenants and provide peace of mind for both parties.
When to use a Lease Subordination Agreement:
You're a landlord leasing mortgaged property and you want to help ensure that a tenant can remain on the property even if you no longer own it.
You've rented mortgaged property and want to be protected if the landlord no longer owns the property.
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Sample Lease Subordination Agreement
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Lease Subordination, Non-Disturbance, and Attornment Agreement
THIS AGREEMENT is made on , by and between (hereinafter the "Mortgagee") , , and , of , , (hereinafter, the "Tenant").
RECITALS
Tenant entered into a lease (hereafter, the "Lease") dated , with , (hereafter the "Landlord"), of , , , covering a portion of the real property legally described as ,and more commonly known as , , , (hereinafter, the "Real Property").
Mortgagee has made a mortgage loan to Landlord, which mortgage loan is secured by, among other things, a mortgage (hereafter the "Mortgage") on the Real Property.
Tenant has agreed to subordinate its leasehold interest in return for Mortgagee's agreement not to disturb Tenant's possession of the Real Property under the Lease as long as Tenant is not in default under the terms of its Lease.
WITNESSETH
NOW, THEREFORE, intending to be legally bound, the Parties hereto agree as follows:
1. Subordination
Tenant agrees with Mortgagee that the Lease, and all of the Tenant's rights thereunder, is now and shall continue at all times hereafter to be subject and subordinate to the lien of the Mortgage, and to any and all increases, renewals, substitutions, replacements and/or consolidations of the Mortgage, and to any future mortgage or mortgages affecting the leased premises held by the holder of the Mortgage.
2. Non-disturbance
So long as no default exists, nor any event has occurred, which has continued to exist for such period of time (after notice, if any, required by the Lease) as would entitle the Landlord to terminate the Lease or would cause, without any further action of the Landlord, the termination of the Lease or would entitle the Landlord to dispossess Tenant thereunder, the Lease shall not be terminated, nor shall the Tenant's use, possession or enjoyment in the Premises be interfered with, nor shall the leasehold estate granted by the Lease be affected in any other manner, in any foreclosure or any action or proceeding instituted under or in connection with the Mortgage or in case the Mortgagee takes possession of the Real Property pursuant to any provisions of the Mortgage, unless the Landlord would have had such right if the Mortgage had not been made. Notwithstanding the foregoing, any person acquiring the interest of the Landlord as a result of the above described foreclosure or other action or proceeding, his successors and assigns (herein called the "Purchaser") shall not be:
(a) liable for any act or omission of any prior landlord;
(b) subject to any offsets or defenses which Tenant might have against any prior landlord; or
(c) bound by any rent or additional rent which Tenant might have paid for more than the current month to any prior landlord; or
(d) bound by any amendment or modification of the Lease made without the Mortgagee's prior written consent.
3. Attornment
If the interests of Landlords under the Lease shall be transferred by reason of foreclosure or other proceedings for enforcement of the Mortgage, Tenant shall be bound to the Purchaser under all of the terms, covenants and conditions of the Lease for the balance of the term thereof remaining and any extensions or renewals thereof which may be effected in accordance with any option therefof in the Lease, with the same force and effect as if the Purchaser were the Landlord under the Lease. Tenant hereby agrees to attorn to the Purchaser, including the Mortgagee if it be the Purchaser, as its Landlord, such attornment to be effective and self-operative without the execution of any further instruments upon Purchaser's succeeding to the interest of the Landlord under the Lease. The respective rights and obligation of Tenant and Purchaser upon such attornment, to the extent of the then remaining balance of the term of the Lease and any such extensions and renewals, shall be and are the same as now set forth in the Lease.
4. Successors and Assigns
This Agreement shall be binding upon and inure to the benefits of the Parties hereto and their successors in interest and assigns.
5. Signatures
ThisAgreement shall be signed by on behalf of , and by .
MORTGAGEE:
| By: | Date: |
, Its
TENANT:
| By: | Date: |
