Why are Lease Subordination Clauses Used?

Mortgage lenders typically require leasehold interests to be subordinate to the lender’s interests. Consequently, commercial property landlords want tenants to agree to a subordination clause so that the lease is subordinate to any existing or future mortgages on the property. In exchange for subordination, commercial tenants want a non-disturbance agreement from lenders, which is contained in a subordination, non-disturbance, and attornment agreement (commonly referred to as an “SNDA”). Likewise, if the property is subject to a ground lease, the ground lessor typically requires existing leases to be subordinate to the ground lease. Use this conditional subordination clause to subordinate the landlord’s existing or future mortgages or ground leases.

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Related Content

• Provisions in a Subordination, Non-Disturbance, and Attornment Agreement
  Study this practice note explaining key provisions of a typical SNDA used in commercial leases where the parties desire to change or clarify state laws impacting the relationships of the lender, tenant, and landlord.

• Subordination, Non-disturbance, and Attornment Agreements in an Acquisition Loan
  Learn about the essential components of an SNDA in an acquisition loan.

• Subordination, Non-disturbance, and Attornment Agreements in a Construction Loan
  Refer to this practice note explaining the purpose and key components of an SNDA in a construction financing transaction.

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