An SNDA (Subordination, Non-Disturbance, and Attornment) agreement is a three-part contract among a tenant, landlord, and the landlord's lender that: (1) subordinates the tenant's leasehold to the lender's mortgage, (2) commits the lender not to disturb the tenant's occupancy so long as the tenant is not in default, and (3) requires the tenant to attorn (recognize) a new landlord following a foreclosure. SNDA provisions in CMBS financings are governed by Freddie Mac Multifamily Seller/Servicer Guide standards (https://mf.freddiemac.com/docs/multifamily-seller-servicer-guide.pdf) and Fannie Mae DUS requirements (https://www.fanniemae.com/multifamily/lenders); for SBA 504 projects, SNDA recording requirements are addressed in SOP 50 10 7.1 (https://www.sba.gov/document/sop-50-10-standard-operating-procedure).
SNDA agreements exist because commercial leases and mortgages can conflict in priority — and both landlords (seeking financing) and tenants (needing security of tenure) need certainty about what happens on foreclosure. The three elements address each party's interest. Subordination: The tenant's leasehold interest is junior to the lender's mortgage, meaning if the property is foreclosed, the lender's interest takes priority. Without subordination, a pre-existing lease might survive foreclosure and encumber the lender's title — making the property harder to sell and reducing collateral value. Most leases contain an automatic subordination clause; the SNDA formalizes it in a recordable instrument acceptable to the lender. Non-Disturbance: In exchange for subordinating, the tenant receives the lender's covenant not to disturb the tenant's occupancy — i.e., if foreclosure occurs and the lender (or a purchaser at foreclosure sale) takes the property, the tenant's lease will be honored as long as the tenant is not in default. Non-disturbance is the critical tenant protection: without it, a foreclosure could terminate the lease and force the tenant out even if the tenant has paid all rent on time. Attornment: The tenant agrees to recognize and 'attorn to' (acknowledge as landlord) whoever acquires title through foreclosure. This ensures continuity — the new owner steps into the landlord's shoes and rent obligations flow correctly from day one. Lender requirements: Most institutional lenders — including CMBS, Freddie Mac, Fannie Mae, and life insurance company lenders — require SNDA agreements with each major tenant (often those above 10-20% of gross rent) as a loan closing condition. SBA 504 lenders frequently require SNDAs for leasehold-secured collateral. The SNDA must be recorded in the real property records to be enforceable against subsequent purchasers.
Without a recorded SNDA, the outcome depends on whether the lease predates or postdates the mortgage. A lease recorded before the mortgage generally survives foreclosure and binds the new owner. A lease recorded after the mortgage is generally extinguished by a foreclosure — the tenant loses occupancy rights regardless of whether rent is current. This is the core risk that non-disturbance protection addresses. Every commercial tenant negotiating a new lease should require SNDA as a lease condition if the landlord has a mortgage.
Yes. Key tenant negotiation points: (1) scope of non-disturbance — does it cover all defaults or only monetary defaults? (2) lender's obligations to complete landlord work-in-progress (TI build-outs) after foreclosure; (3) whether the lender is bound to honor lease modifications made after the SNDA; (4) cure periods before a lender can terminate the lease post-foreclosure. Lenders typically provide SNDA forms heavily weighted toward their interests — tenants should have counsel review and redline before signing.
Not universally, but SBA 504 lenders frequently require SNDAs when the collateral includes a leasehold or when a commercial tenant's lease significantly affects property value. SBA's SOP 50 10 7.1 requires lenders to ensure adequate collateral documentation, and for leased commercial spaces, an SNDA ensures the lender's mortgage is properly subordinated to or protected against existing tenancies. Borrowers negotiating SBA 504 financing on owner-occupied CRE with existing tenants should expect their lender to require SNDA from those tenants.