SNDAs in Commercial Real Estate Financing: A Borrower’s Guide

01

Understand the three functions of an SNDA

Subordination addresses whether the tenant’s leasehold interest ranks behind the lender’s mortgage or deed of trust. Non-disturbance generally addresses whether a tenant that satisfies stated conditions may continue occupying after a foreclosure or similar lender remedy. Attornment generally requires the tenant to recognize a successor owner as landlord. These functions interact but are not automatic, universal, or identical across forms. A document may include exceptions, conditions, waivers, certifications, and additional agreements that matter as much as its title.

02

Build a lease-by-lease requirement matrix

List every tenant, premises, lease date, amendments, guaranties, commencement and expiration dates, options, current rent, deposits, defaults, lender-related clauses, and notice addresses. Record whether the lease is already subordinate, requires a separate SNDA, gives the tenant a right to a specified form, conditions subordination on non-disturbance, or sets a delivery deadline. Compare the matrix with the rent roll, lease abstracts, estoppels, title commitment, organizational chart, appraisal, and lender checklist so missing documents and inconsistent names are visible early.

• Requested amount and use of proceeds
• Historical and current financial statements
• Complete debt and ownership schedules
• Collateral and transaction documentation

03

Identify which signatures are closing conditions

A lender may require SNDAs from all tenants, only major tenants, tenants representing a specified share of income or area, or tenants named in the commitment. The purchase agreement or loan commitment may define different thresholds and remedies. Confirm the required form, acceptable deviations, authorized signatories, notarization, recording, counsel opinions, delivery method, and lender approval process. Do not assume an unsigned draft, tenant email, lease clause, or landlord certification satisfies the condition.

04

Reconcile subordination with existing priority language

Read the lease, memorandum of lease, mortgage, assignment of leases and rents, title exceptions, and proposed SNDA together. Some leases subordinate automatically; others require a future instrument or make subordination conditional on stated protections. Existing mortgages, ground leases, reciprocal easement agreements, prior SNDAs, and leasehold financing can create additional layers. Counsel should resolve conflicts and recording questions rather than relying on a generic statement that the lease is subordinate.

05

Review non-disturbance conditions and tenant defaults

Non-disturbance protection may depend on the tenant not being in default, the lease remaining in force, the tenant attorning to the successor, or the tenant accepting specified limitations. Review how defaults are defined, whether notice and cure periods apply, and what happens to renewal options, expansion rights, purchase rights, exclusives, offsets, abatements, prepaid rent, deposits, tenant improvements, restoration obligations, and claims against the prior landlord. The borrower should understand requested protections before representing that the form will not affect underwriting or remedies.

06

Coordinate lender notice and cure rights

Many SNDAs require the tenant to send the lender copies of landlord-default notices and give the lender additional time to cure. Confirm the lender’s notice address, permitted delivery methods, effective date, cure period, and whether possession or foreclosure is required for a nonmonetary cure. Compare those rights with the lease and loan agreement. An inconsistent address or impossible cure timeline can create ambiguity, while an overly broad obligation can impose operational burdens the lender will not accept.

07

Test casualty, condemnation, assignment, and successor provisions

Review who controls insurance and condemnation proceeds, whether the lease may terminate, who must restore, and whether a successor landlord assumes unfinished work or payment obligations. Examine restrictions on lease amendments, assignments, subleases, surrender, termination, rent prepayment, and setoff. Determine how the agreement treats security deposits, letters of credit, rent paid in advance, landlord concessions, expansion rights, and prior claims. These provisions can affect property cash flow, value, loan remedies, and tenant economics.

08

Manage negotiations as a controlled closing workstream

Use one approved form and a dated issue list showing each tenant comment, landlord response, lender and counsel decision, open business point, responsible person, and deadline. Send requests through the notice and contact channels required by the lease. Verify tenant legal names and signing authority, preserve clean and redlined versions, and obtain lender approval before execution. Avoid side letters or informal promises that are not reconciled to the loan, lease, purchase, and title documents.

09

Model the financing effect of unresolved SNDAs

If a required SNDA is delayed or rejected, the lender may defer closing, exclude income, reduce proceeds, require a reserve or indemnity, change covenants, or decline the transaction. Quantify the affected rent, occupancy, debt-service coverage, valuation, tenant concentration, rollover exposure, and closing costs. Build contingency paths for alternate lender acceptance, revised structure, extension rights, purchase-agreement remedies, or additional equity without representing that any accommodation is assured.

010

Control delivery and obligations after closing

At closing, confirm that final SNDAs match approved versions, signatures and acknowledgments are complete, originals and recordings are handled correctly, and notice addresses are updated. Store the agreements with the leases and loan documents, calendar lender and tenant notice duties, and incorporate restrictions into lease administration. Future amendments, defaults, casualty events, assignments, renewals, and refinancing should be checked against the SNDA. PFCS can help organize financing requirements and coordinate materials with third-party capital sources, while the parties and qualified counsel determine legal rights, priority, approval, and final terms.