This Common Administrative Procedure Is Now Killing Some Deals

Commercial real estate attorney Annie Malo was quoted in a GlobeSt.com article about significance of Subordination, Non-Disturbance, and Attornment Agreements (SNDAs) in commercial real estate transactions. The article highlights how tenants and lenders are using SNDAs in new ways, potentially affecting deal timelines. The SNDA's three main components - subordination, non-disturbance and attornment - work together to provide clarity and security for all parties involved in the transaction.

Ms. Malo commented that "tenants don't want to be sent packing if there is a foreclosure, and a lender knows that the only chance it has of recovering any money from a foreclosure is if a tenant continues to pay rent."

The use of SNDAs is evolving, with significant implications for real estate transactions. "When I first started practicing, it was common for the lender to require an SNDA only from tenants that leased more than 10,000 square feet or were the sole tenant in a standalone building," Ms. Malo said.

The review of SNDA documents should not be handled as a minor task, as it can lead to delays in financing or even jeopardize deals, stressing the need for landlords to prioritize these agreements to ensure smooth transactions.

"The lender is going to read every lease that you have on the property and every lease that requires an SNDA," Ms. Malo cautioned.

"The lender is going to insist that those SNDAs be in their hands before they're going to fund their loan. So, I have seen it kill deals where the landlord isn't focusing on that, and then the loan doesn't go through," she added.

READ: This Common Administrative Procedure Is Now Killing Some Deals