Legalese: What is an SNDA?
“SNDA” stands for Subordination, Nondisturbance and Attornment Agreement.
Those words may seem like the nonsensical words in Lewis Carroll’s poem “Jabberwocky” if you aren’t intimately involved in commercial real estate financing. If you are a tenant leasing a space, there will likely be several sections in your lease addressing subordination and attornment, at a minimum. I promise you, the terms have meaning and are less scary than the frumious Bandersnatch!
While these provisions are part of a lease, they do not come into play unless and until the landlord is in financial trouble and foreclosure is a looming possibility.
“Subordination” means that you will agree that, even if you signed a lease before the bank provided financing, your interest in the property will be subordinate to (or come after) the bank’s interest. “Attornment” means that you will agree to “attorn to” the bank or any third party the bank sells the property to after foreclosure. That is, you agree to treat the bank or subsequent purchaser as if they were the one who signed the lease as the landlord. The bank wants these assurances prior to providing financing to a landlord in order to protect its loan, so those provisions are commonly included in a landlord’s standard form of lease even if the property isn’t currently going to be financed in order to keep flexibility for future financing.
As a tenant, the protection of “nondisturbance” is desirable in exchange for the agreement to subordinate to a landlord. Nondisturbance in this context means that if the bank forecloses on the landlord’s interest, the bank (and any purchaser from the bank) will agree that it will respect all of the terms of the lease between the landlord and tenant, including the term and the rent rates, so long as the tenant is not in default under the terms of that lease.
Once you understand the terminology, commercial lease provisions begin to make more sense and are less terrifying than the Jabberwock!