Subordination, Non-Disturbance & Attornment (SNDA)

An SNDA (Subordination, Non-Disturbance and Attornment agreement) is a three-party contract between a commercial tenant, the property owner (landlord), and the landlord's mortgage lender that governs lien priority and tenant protections in the event of foreclosure. SNDAs are required by virtually all institutional lenders — including CMBS servicers, life insurance companies, bank construction lenders, and Fannie Mae/Freddie Mac for multifamily — before funding a loan secured by income-producing real estate.

The Three Clauses Explained

• Subordination: The tenant's leasehold interest is subordinate (junior) to the lender's mortgage or deed of trust lien. This subordination is essential for the lender to secure first-position lien priority — required for the loan to be bankable and, in the case of CMBS transactions, to be pooled and securitized under UCC Article 9 priority rules.
• Non-disturbance: The most critical clause for tenants. The lender contractually promises not to disturb the tenant's occupancy rights — meaning that even if the lender forecloses on the landlord's mortgage and takes title to the property, the lender will honor the existing lease (including rent, term, and renewal options) as long as the tenant is not in default. Without non-disturbance protection, a foreclosing lender could technically terminate the tenant's lease as a junior lien interest.
• Attornment: The tenant agrees to recognize the new property owner — whether that is the foreclosing lender, a CMBS special servicer, or a third-party purchaser at a foreclosure sale — as the legitimate successor landlord. The tenant must continue paying rent to the new owner and performing all lease obligations from the transfer date forward.

Key SNDA Negotiation Points for Tenants

• Unspent TI allowance protection: Tenants must negotiate explicit language requiring the successor landlord to fund any remaining tenant improvement allowance the original landlord committed. Without this clause, a foreclosing lender may argue the TI obligation does not survive foreclosure.
• Casualty and condemnation proceeds: The SNDA should specify that insurance proceeds and condemnation awards for tenant-occupied space are applied to rebuilding rather than repaying the lender's loan.
• Pre-payment and security deposit: If the tenant has prepaid rent or holds a security deposit, the SNDA should confirm the successor landlord assumes these obligations.
• Lender form vs. tenant-friendly form: Lenders (particularly CMBS servicers) routinely issue standard SNDA forms weighted in the lender's favor. Tenant attorneys and commercial real estate counsel should negotiate non-disturbance protections that cover all lease obligations, not just base rent payment.

When SNDAs Are Required and How They Interact with Lease Abstraction

SNDAs are required both at lease signing (if an existing mortgage already encumbers the property) and when the landlord obtains new financing or refinancing during the lease term. In REIT portfolios and institutional commercial real estate, SNDAs are tracked as critical documents alongside lease abstractions. Lextract's AI extraction pipeline identifies SNDA status, subordination clause language, and non-disturbance protections as part of the 126-field lease abstraction output — allowing asset managers and lenders to confirm SNDA coverage across entire portfolios in minutes rather than weeks of manual review.