A subordination clause provides that the tenant's leasehold interest is subordinate — lower in priority — to the rights of the landlord's lender. It means that if the landlord defaults on its mortgage and the lender forecloses, the lender's superior lien takes precedence over the tenant's lease, which could theoretically allow the foreclosing lender to terminate the lease and evict the tenant.
By Angel Campa, Founder · Updated March 2026
Subordination clauses are nearly universal in commercial leases with mortgaged properties, but they create significant risk for tenants who have made substantial investments in their leased premises. Without a corresponding Non-Disturbance Agreement (SNDA), the tenant faces the risk of losing its lease through foreclosure even if the tenant has been a perfectly performing tenant. This risk is especially acute for tenants with long remaining lease terms, significant build-out investments, or business operations that cannot easily relocate.
Never agree to subordination without simultaneously obtaining a Non-Disturbance Agreement from the lender. The SNDA is the counterbalance that protects the tenant: the lender agrees not to disturb the tenant's possession as long as the tenant is not in default, even after foreclosure. Negotiate to include subordination, non-disturbance, and attornment in a single tri-party document (SNDA) executed by the landlord, tenant, and lender at lease commencement. Require the landlord to deliver SNDAs from all existing and future lenders as a condition of lease effectiveness.
Automatic subordination (applies without separate agreement), subordination conditioned on lender's delivery of SNDA, self-subordination clauses (tenant agrees to subordinate to future mortgages), and subordination limited to institutional lenders with assets above a specified threshold.
Lextract extracts these fields directly from your lease PDF when this clause is present:
Non-Disturbance Clause
A non-disturbance clause is a promise by the landlord's lender that, in the event of foreclosure on the property, the lender will not disturb the tenant's possession and will allow the lease to remain in force — provided the tenant is not in default.
Attornment Clause
An attornment clause requires the tenant to recognize and "attorn to" a new owner of the property — typically a lender who has foreclosed on the landlord's mortgage — as the new landlord under the existing lease.
Assignment and Consent Clause
An assignment and consent clause governs the tenant's ability to transfer its entire leasehold interest to a third party (assignee) who then becomes the new tenant under the lease.
What SNDA agreements are, how subordination, non-disturbance, and attornment each work, when SNDAs are required, and how to negotiate non-disturbance protection.
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