13 Apr Subordination Non Disturbance And Attornment Agreement
Attornment is a stay of feudal law when the law has considered the relationship between the landlord and the tenant as personal. Attornment is the tenant`s agreement to become a tenant of a person other than the original landlord, who has now taken possession of the property. In a 1939 Ohio case, this doctrine was applied to exempt a tenant from the obligation to pay rent to his landlord`s lender after the forced execution of the mortgage, because the tenant had never polluted. New York Life Ins. Co. v. Simplex Products Corp., (1939) 135 Ohio St. 501, 21 N.E.2d 585. How does the SNDA do all this? Subordination, non-interference and attornment are closely related concepts.
Subordination is the tenant`s agreement that his shares be subordinated to those of the lender under the lease. Of course, in many situations, the mortgage is already higher depending on when the mortgage was registered and when the lease was registered or whether the tenant took possession of the property. But the lender will want to ensure that its priority will not be lost if the loan documents are changed, and both the lender and the lessor will want to protect the lessor`s ability to refinance with another lender. Keeping It Real. The credit climate can have an impact on what the rental agreement requires of the landlord, even for a large tenant. What does your lease say subordination? What will the lease say if you negotiate a new lease? What provisions should tenants and lenders look for in an SNDA? Future articles in Keeping It Real will address some of these issues. Commercial owners regularly require subordination clauses in their leases in order to maintain the possibility of using the building as a loan guarantee. Most lenders prohibit commercial real estate from being used as collateral for a loan, unless their mortgage rates are higher than the rental rates of all tenants. In other words, the lender has the option of terminating the tenants` tenancy agreement in the event of a commercial foreclosure.
Non-disruption, as the name suggests, is the lender`s promise not to interfere with the tenant`s right not to occupy the premises in the event of foreclosure. In many states, including Ohio, the enforcement of the mortgage automatically terminates the lease, unless the lease is superior or the mortgagee has expressly agreed that the lease will survive. Non-interference agreements are generally combined with the confirmation of the tenant`s subordination and subordination obligations in an SNDA.