A lease provision stating that the tenant's leasehold interest is subordinate to any existing or future mortgage or deed of trust on the property, meaning a lender's interest takes priority over the tenant's rights.
Most commercial leases automatically subordinate the tenant's interest to any mortgage on the property. This means that if the landlord defaults on its loan and the lender forecloses, the lender could potentially terminate the lease. To protect tenants, subordination clauses are typically paired with a non-disturbance agreement (SNDA), in which the lender agrees not to disturb the tenant's possession as long as the tenant is not in default. Tenants should never agree to subordination without a corresponding non-disturbance covenant. Lease abstracts should note whether the subordination clause includes an SNDA or if one is required from existing lenders.
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