Mortgages and Rents – SNDA Agreements

From the borrower’s perspective, there are some special issues which arise with rents on commercial real estate properties in a foreclosure or bankruptcy setting. These issues must be thoroughly analyzed on the front end because cash is king, and continued use of cash to support the upkeep of the properties and to pay borrower’s legal and accounting fees might be contested by the lender. Make sure you know whether the lender and the tenants have their own contractual agreement in the form of a standard or non-standard SNDA agreement. What is a “SNDA” agreement? S = Subordination: The tenant typically agrees that his lease rights are subordinate to the lender’s mortgage; N+D = Non Disturbance: The lender typically agrees not to evict a tenant during any foreclosure or take over of the property, so long as the tenant is not in default under the lease; and A = Attornment: The lender and tenant agree to recognize each other’s rights, with the lender being treated as if he became the landlord by enforcing his mortgage against the borrower, and the tenant remaining obligated by the terms of the lease, following any foreclosure or takeover of the property. We have seen situations where the lender failed to obtain SNDA agreements. In analyzing and strategizing over the various rights of the different stakeholders involved, this is an important fact to know.

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