A non-disturbance agreement is a written promise from your landlord’s lender that your lease will stay in place if the landlord defaults on the mortgage and the lender forecloses. In commercial real estate, it almost always comes bundled with two other promises in a single document called a Subordination, Non-Disturbance, and Attornment agreement, or SNDA. The practical point for a tenant is simple: with this agreement, foreclosure does not end your tenancy; without it, it often does.
Why the Agreement Exists
Real property interests are ranked by priority. If your landlord’s mortgage was recorded before your lease was signed, the mortgage comes first. When a senior mortgage goes into default and the lender forecloses, the foreclosure sale extinguishes interests that are junior to the mortgage, and a later lease is one of them. Whoever buys the property at the foreclosure sale has no obligation to honor that lease. You could be current on every rent payment and still be told to leave.
A non-disturbance agreement rewrites that outcome. The lender agrees in writing not to disturb your tenancy if the property goes through foreclosure. In exchange, you agree to recognize the new owner as your landlord and keep paying rent on the same terms. That is the core bargain, and it is the reason commercial tenants with meaningful buildout costs or long-term business commitments treat an SNDA as non-negotiable before signing a lease.
The Three Promises Inside an SNDA
An SNDA bundles three related promises into one document. Each serves a different party, and reading them together tells you what you are giving up and what you are getting.
Subordination
This is your concession to the lender. You agree that your lease is lower in priority than the mortgage. The lender wants this because it keeps the property clean as collateral; if you refused to subordinate, your lease could in some situations outrank the mortgage, making the loan riskier.
Some commercial leases already contain an automatic subordination clause that makes the lease junior to any existing or future mortgage. If yours does, the subordination half of the SNDA may just confirm what the lease already says. The important difference is that an automatic clause in the lease hands priority to the lender without giving you anything back. An SNDA pairs that subordination with the non-disturbance protection.
Non-Disturbance
This is the lender’s promise to you. If the landlord defaults and the lender forecloses, the lender or the foreclosure-sale buyer will honor your lease and let you keep occupying the space on its existing terms. The promise is conditioned on you not being in default of your own lease obligations. Stop paying rent or violate a material term, and the protection falls away.
Attornment
This is your promise back to the lender. If foreclosure happens, you will recognize the new owner as your landlord and continue paying rent to them. Attornment gives the new owner a performing tenant on day one and gives you continuity in your space.
What a New Owner Can Still Refuse to Honor
Keeping your lease alive is not the same as making the new owner responsible for everything the old landlord owed you. SNDAs routinely carve out obligations the successor landlord will not inherit. This is where tenants get caught off guard.
A successor landlord after foreclosure will commonly refuse responsibility for:
- Prior landlord defaults, such as repairs the old landlord failed to make or a buildout that was promised but never delivered.
- Security deposits that the original landlord collected but never handed over to the new owner.
- Rent paid more than one month in advance to the original landlord.
- Lease amendments, assignments, or sublease consents made after the SNDA was signed without the lender’s approval.
- Tenant improvement allowances the old landlord promised but had not paid out before foreclosure.
- Offsets and defenses you could have asserted against the old landlord, including rent offsets for unreimbursed repair costs.
- Purchase options or rights of first refusal you negotiated in the lease.
Every one of these carve-outs is negotiable. That is why reading the SNDA matters as much as reading the lease.
What to Negotiate, and When
Leverage runs out quickly. A tenant has the most negotiating room before signing the lease, when the landlord wants to close the deal and the lender wants to close the loan. Once the lease is signed and the loan has funded, no one has much reason to reopen the terms. The cleaner approaches are to include agreed SNDA language directly in the lease, or to make the lease contingent on the landlord delivering an acceptable SNDA within a set number of days.
Within the document itself, several points deserve close attention:
- Scope of subordination. Push to subordinate your lease only to the lien of the mortgage, not to the entire loan agreement, so your lease isn’t treated as junior to every document in the loan package.
- Cure rights. Ask for notice of the landlord’s mortgage default and a reasonable window to cure it yourself. Early warning gives you time to protect your tenancy.
- Preservation of lease rights. Compare the SNDA against the rights you negotiated in the lease. Renewal options, expansion rights, and rent offsets can be quietly nullified by boilerplate language.
- Insurance proceeds. If your lease requires the landlord to rebuild after a casualty, negotiate language keeping the lender from intercepting insurance proceeds needed for those repairs.
- Improvement allowances. Try to make the successor landlord responsible for any future tenant improvement payment the landlord still owes you, not just for defaults arising after the ownership change.
Institutional tenants with experienced counsel routinely mark up SNDA drafts heavily. Landlords who deal with sophisticated tenants often keep a lender-approved SNDA form on hand to shortcut the three-way negotiation.
Estoppel Certificates Arriving at the Same Time
When a landlord is refinancing or selling, tenants frequently receive two requests together: sign an estoppel certificate and sign an SNDA. The estoppel is your written confirmation of the current facts about your lease, including how much rent you pay, when the lease expires, whether the landlord is in default, and whether any options exist. Once signed, you are bound by those statements. Leave out an outstanding landlord obligation and you may lose the right to enforce it later.
Check every detail before you sign: rent amount, expiration date, each option, and every amendment. Add a statement that the estoppel certificate does not amend or modify the lease. A careless estoppel can undo protections you negotiated in the SNDA.
Should the SNDA Be Recorded
An SNDA can be recorded in the county land records where the property sits. Recording creates constructive notice, so a future buyer or lender is treated as knowing the agreement exists whether or not they ever read it. That gives you an extra layer of protection if the property changes hands by sale rather than by foreclosure, because the new owner cannot claim ignorance of your rights.
Recording is not required for the agreement to bind the parties who signed it. Requirements vary by jurisdiction, but most counties require notarization and charge a recording fee based on the page count. Asking for recording is a reasonable item to put on the negotiation list.
If You’re a Residential Tenant
SNDAs are a commercial-leasing tool, and residential leases rarely include one. Residential tenants do have a federal floor that commercial tenants do not. The Protecting Tenants at Foreclosure Act, made permanent in 2018, requires a new owner who acquires residential property through foreclosure to give existing tenants at least 90 days’ notice before eviction. For tenants with a bona fide lease, the new owner must generally honor the remaining lease term rather than terminate on 90 days’ notice.
A lease qualifies as bona fide only if it was an arm’s-length transaction, the tenant is not the mortgagor or a close family member of the mortgagor, and the rent is not substantially below fair market value, unless the reduction is a government subsidy. One major exception: a buyer at foreclosure who intends to live in the property as a primary residence can terminate even a bona fide lease after giving the 90-day notice. The Act applies to federally related mortgage loans and residential property, which is why commercial tenants cannot rely on it and continue to depend on an SNDA for stronger, lease-specific protection.