An SNDA agreement is a common part of many commercial real estate transactions, but its unfamiliar name often leaves people wondering what it actually does. If you are signing a commercial lease or financing a property, understanding this document can help you know what to expect if ownership changes.
Here are the three parts of an SNDA agreement and why each one matters.
Subordination
One part of an SNDA agreement establishes that your lease may be subordinate to the lender’s mortgage. In simple terms, this means the lender’s interest in the property takes priority over your lease if certain legal issues arise.
Although that may sound concerning, subordination is a standard feature in many commercial real estate transactions. By itself, it does not mean you will lose your lease or have to leave the property. Instead, it helps define how your lease and the lender’s rights work together if the property owner defaults on the loan.
Non-disturbance
Another important provision helps protect your right to remain in the property if the lender forecloses. If you continue to follow the terms of your lease, the lender generally agrees not to remove you simply because they have taken ownership of the building.
This can be especially valuable if you rely on your location to serve customers or operate your business. Rather than worrying that a foreclosure automatically ends your lease, you have greater assurance that your tenancy may continue under the agreed terms.
Attornment
The final part explains what happens if the property changes hands after a foreclosure or similar event. Instead of ending the lease, you agree to recognize the new owner as your landlord and continue honoring the existing lease.
This provision helps avoid unnecessary disruption by keeping the landlord-tenant relationship in place, even though ownership of the property has changed.
Know what you are agreeing to
Every SNDA agreement deserves careful review before you sign it because the exact language can affect your rights and obligations. While Ohio commercial real estate transactions often use these agreements, the specific terms can vary from one deal to another.
If you are asked to sign an SNDA agreement and are unsure how it could affect your lease or property interests, seeking legal assistance can help you understand the document before you commit to its terms.