SNDA Agreements: Subordination, Non-Disturbance, Attornment

Conor Meyers — Co-Founder & Business AttorneyHas built and run businesses; advises owners on contracts, transactions, and risk. About Conor →

Subordination is what you give. Non-disturbance is what you get. Never sign one without the other.

When a landlord finances a property, the lender wants its mortgage to have priority over every lease. A tenant that agrees to that without more can lose its lease entirely if the lender forecloses. The SNDA solves this by trading three promises at once. Subordination non-disturbance attornment explained simply: you go behind the mortgage, but the lender promises to leave you alone.

We handle these matters for growth-stage companies in Idaho and California. This is general information — not legal or tax advice on a specific situation.

Subordination without non-disturbance is a one-way trade.

The three parts

Subordination places the lease behind the mortgage in priority. Non-disturbance is the lender’s promise that a tenant not in default keeps its lease if the lender takes the property. Attornment is the tenant’s agreement to accept the lender or a foreclosure purchaser as its new landlord.

Each part protects a different party, and the agreement only works as a package. A tenant asked to subordinate without receiving non-disturbance is giving priority away for nothing.

Three promises, three beneficiaries, one document.

Why lenders require an SNDA

Why lenders require an SNDA comes down to control and predictability. Priority means a foreclosure can extinguish leases the lender does not want, and attornment means it keeps the ones it does — particularly leases with strong covenants at above-market rent.

Lenders also use the document to confirm the lease terms and to require notice of landlord defaults, giving them an opportunity to cure before a tenant terminates.

The lender wants the option to keep good leases and shed bad ones.

SNDA protection for tenants

SNDA protection for tenants matters most where the tenant has invested. A business that funded a substantial buildout, or holds a below-market rate, or depends on a specific location, loses real value if the lease can be wiped out.

Without an SNDA, a tenant that subordinated has no assurance at all. With one, the lease survives foreclosure so long as the tenant performs.

The more you have invested in the space, the more the document is worth.

Negotiating the terms

Negotiating SNDA terms focuses on the carve-outs. Lenders commonly disclaim liability for the prior landlord’s defaults, for security deposits they never received, for unpaid improvement allowances, and for lease amendments made without consent.

Tenants should press on the items that matter to them — particularly an unpaid allowance or an option to renew. It is also worth separating the SNDA vs estoppel certificate question: an estoppel confirms today’s facts, an SNDA governs a future event. The FDIC’s lender resources explain why both are standard closing conditions.

The carve-outs are where the protection is won or lost.

What this means in practice

Timing matters as much as content. A tenant negotiating a new lease has real leverage to require that the landlord obtain non-disturbance from its existing lender, and to commit to obtaining it from future lenders as a condition of the tenant’s subordination. A tenant approached after a loan has closed has almost none, because the lender has already advanced the money and gains nothing by agreeing.

Most of these problems are cheaper to prevent than to argue about.

The underlying rules on this are published directly by Idaho Legislature, U.S. Small Business Administration, and both are worth reading before you rely on a summary of them — including this one.

A simple plan to get a legal partner in your corner

Owners who bring in attorney for a commercial property purchase early almost always pay less than those who call one afterward.

The engagement at a glance

A three-step path from first call to ongoing protection.

Frequently asked questions