How commercial tenants can enforce their rights in the event of foreclosure

From SmartBusiness 02.01.2012

Summary: Commercial tenants (for example, those in Berwick Marketplace) whose landlords go into foreclosure may find out the hard way why SNDA lease provisions are important. Subordination, nondisturbance and attornment — or SNDA — clauses must be examined and negotiated before signing a commercial lease in today's market.

Key Quotes:
“Subordination, nondisturbance and attornment — or SNDA — provisions are something tenants should pay attention to in their lease in the event of a default by the landlord that leads to foreclosure,” says Cameron McCausland, partner and director of Transaction Management at Southfield, Michigan-based Plante Moran CRESA.

SNDA provisions define the responsibilities of property owners, lenders and tenants if the owners should default. Distribution of insurance proceeds in the event of casualty or condemnation is also often included in SNDAs.

Tenants need to pay attention to SNDA provisions in their leases to avoid the negative fallout should a lender take over and attempt to implement aggressive tactics. When the lender becomes the landlord, its primary objective will be to preserve or recover as much capital as possible, which can involve raising rent, failing to honor rental abatement periods, revoking tenant improvement allowances and even eviction. The lender’s actions are often driven by market conditions.

Read the full article at: How commercial tenants can enforce their rights in the event of foreclosure

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga