Non Disturbance Agreement

The court challenged the tenant and found that the rent on the second mortgage was not binding. The Court found that when a mortgagor is in default with a mortgage and a lender takes possession of a property, the mortgage does not necessarily enter the borrower`s shoes with respect to a commercial lease. The court found that a lease agreement did not involve a lender who, after taking possession of a property, was not binding unless the mortgage accepted and was aware of the lease when the mortgage was received. Despite this, tenants and mortgages can create a tenancy agreement by agreement or by behavior. The court found that there was only a verbal agreement between the tenant and the landlord at the time the landlord obtained the mortgage and the actual rent was made after the mortgage application. The court also found no evidence that the first lender was aware of the verbal agreement between the landlord and the tenant, or that it accepted the tenancy agreement. The Court therefore found that the lease was not binding on the first or second mortgage. As the name suggests, an SNDA is really three chords, all packaged in an ordinary package. The three aspects of the SNDA only come into play if the leased property is isolated by a lender holding a portion of the securities (mortgages or trust receipts) guaranteed by the lease.

Let`s first look at the “subordination” part of the SNDA. If the lease agreement exists at the time of registration of its security interest in the property, the lease is greater than the security interest and, in the event of embezzlement by the lender, the title acquired by the buyer at the time of the forced sale is subordinated to the existing lease agreement or is submitted to it. When a tenant signs an SNDA, the tenant agrees to reverse the priorities and outcome during the enforcement; that the lender`s security interest exceeds the existing lease and that the security purchased by the purchaser at the time of the forced sale exceeds the level of credit in force after being transferred by the lender. Such a change in priority is essential for the lender, since the lender or other forced sale buyers would have the right to terminate the lease after the enforcement because of its best interest, in the absence of a dysfunctional agreement. This case shows how important it is for tenants to get a non-interference agreement. A non-dysfunctional tenancy agreement is an agreement between the tenant and the landlord`s lender, which allows the tenant to remain in possession of the rental premises despite possible enforced enforcement action against the landlord. If, in this case, a default agreement had been reached, the result could have been very different. As a benefit to professional commercial real estate tenants, a non-interference clause can help avoid the possibility of cost changes by ensuring that their rental conditions are met when the property reserve is granted to the property. It could also protect a business tenant who invests in renovations when the landlord loses the property by foreclosure or bankruptcy and the tenant is named as a defendant.

The “Attornment” part of the agreement, which is perhaps the most confusing part of an SNDA, simply means that the tenant agrees to recognize the buyer as a new owner under the lease upon the forced sale.