As the name suggests, an SNDA is made up of three chords, all packed in a suitable package. The three aspects of the SNDA will only apply if the leased property is seized by a lender with a security interest (mortgage or trust) secured by the rental property. Let`s first look at the “subordination” part of the SNDA. If the lease exists at the time the lender registers its security interest in the immovable property, the lease is greater than the interest of the collateral and, upon enforcement by the lender, the title received by the buyer at the time of the forced sale is subordinated to or subject to the existing lease. If a tenant signs an SNDA, the tenant agrees to reverse the priorities and the resulting result during the enforcement. Indeed, the interest of the lender`s guarantee is higher than the existing lease agreement and, in the event of enforcement by the lender, the title that the buyer receives at the time of the forced sale is higher than the existing lease. Such a change in priority is essential for the lender, as the lender or other buyers would have the right to terminate the lease agreement after the conclusion of enforcement in the absence of a non-disruption agreement, on the basis of its best interests. Keep it real. The credit climate can affect what the lease asks of the landlord, including for a large tenant.
What does your subordination lease say? If you are negotiating a new lease, what should the lease say? What provisions should tenants and lenders pay attention to in the context of an SNDA? Future contributions in Keeping It Real will answer some of these questions.