Prior to refinancing, your landlord’s lender may require that you sign an SNDA, which stands for Subordination, Non-Disturbance and Attornment agreement. Once signed, you will be bound to the terms within it should the landlord’s lender become your landlord, so it’s important to know the facts. A few of our most commonly asked questions about SNDAs are listed below.
A: An SNDA is an agreement between a mortgage lender, a property owner (your landlord) and you (tenant) that outlines your legal rights in the event that your landlord defaults on their mortgage, and the mortgage lender becomes your landlord.
A: Subordination means that the rights of the tenant are subordinate to the rights of the landlord’s lender. In the event that the landlord defaults on the mortgage, Attornment refers to the agreement that the tenant will remain in the lease and the lender becomes the new landlord. In this case, however, you still have rights because the Non-Disturbance clause of this agreement specifies that the new landlord (landlord’s lender) cannot disturb the terms of your lease, even if your landlord defaults on their mortgage.
A: It is in your best interest to sign the SNDA. If a lender takes possession of your premises because your landlord could not pay their mortgage, the lease between you and the landlord is no longer valid without an SNDA, and you are left with no legal rights.
A: It’s common for the SNDA to favor the landlord’s lender, but you must protect your company’s best interest by looking for anything that may alter the terms of the original lease negotiated by your real estate team.
A: Your lease should only be subordinate to the lien of the mortgage and any subsequent renewals and assignments. We do not advise that you become subordinate to the security instrument because, in most cases, you are not provided a copy and have no knowledge of the entire agreement. If your SNDA states that your lease will be subordinate to the security instrument, strike that section and replace the language with the lien of the mortgage.
A: The lender should be aware of any obligations under the lease before assuming the responsibilities of the landlord. With this in mind, it is within your right to expect the landlord’s lender, or any new landlord resulting from the default of the landlord’s mortgage, to cure the default.
A: Read the SNDA carefully because your landlord’s lender should not be able to add additional language allowing them to terminate your lease in any way that is not outlined in your original lease.
SNDAs can be tricky, even after handling them for years. If you’re a Property Works client and have questions about your SNDA, feel free to reach out to your relationship manager. We’re always here to help.