An SNDA is entered among a tenant, the landlord and the landlord’s lender, and it resolves the relationship among them if the loan defaults.
Subordination. The tenant agrees its lease is subordinate to the mortgage, which the lender requires so that its lien has priority.
Non-disturbance. The lender agrees that if it forecloses, it will not disturb the tenant’s possession so long as the tenant is not in default. This is the tenant’s consideration for subordinating, and a subordination without it leaves the tenant vulnerable to having a valuable lease wiped out.
Attornment. The tenant agrees to recognise the foreclosing party as its landlord.
Negotiated carve-outs. Lenders typically qualify their obligations: not bound by prepaid rent, not liable for prior landlord defaults, not bound by amendments made without consent, not obliged to fund tenant improvement allowances. Tenants with material construction obligations must address the last of these specifically or the economics change on foreclosure.
Automatic subordination clauses in the lease should be paired with a requirement that the lender deliver non-disturbance in a commercially reasonable form.
Estoppel certificates are related but distinct: a statement of the lease’s status relied on by a purchaser or lender. They should be answered accurately and with exceptions noted, because they bind.