In our last column (May 19, 2010), we analyzed certain issues related to tenant estoppel certificates in the context of a mortgage financing; in this column we will look at another loan document that requires execution by tenants of the subject property, the Subordination, Non-Disturbance and Attornment Agreement, commonly referred to as an SNDA. Two market factors are helping SNDAs emerge from relative obscurity and confusion to a new level of importance in today’s real estate finance arena.
First, as foreclosures and deed in lieu transactions become increasingly common, SNDAs serve to establish ground rules for the ongoing relationship between newly minted landlords (former lenders or lenders’ designees) and their tenants. Second, new loan offerings are currently dominated by low-leverage financings secured by properties leased entirely or primarily to large, credit-worthy tenants that, in essence, offer credit enhancement to the loan transaction. In each case, SNDAs, which are normally ancillary to the principal credit agreements and guaranties, ought to be scrutinized to better evaluate lender obligations and liabilities following a foreclosure, whether imminent or not.
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