At the end of December, there were $1.6 billion in bank-owned retail properties, according to-based research firm Real Capital Analytics. As more retail properties end up in the hands of court-appointed receivers, tenants are entering uncertain territory when it comes to their rights and responsibilities.
The growing number of receiverships is shedding new light on aclause that got little attention during the industry’s boom years: subordination, non-disturbance and attornment (SNDA) agreements. Such agreements protect both lenders and tenants in the event that a lender forecloses on a property or moves to have a receiver named.
The SNDA agreement is actually three clauses in one:
- The subordination clause is one in which a tenant agrees that its lease is subordinate to the mortgage on the property, or that a lender’s interests come first if a landlord runs into trouble.
- The non-disturbance piece is a guarantee from the lender that in the event of a foreclosure it will not disturb a tenant’s occupancy and will recognize the rights of the lease.
- The attornment piece of the clause is an agreement by the tenant that if a lender forecloses, the tenant will recognize the lender or a court-appointed receiver as the new landlord.
For the full version of the story, pleases click here.