A subordination, non-disturbance, and attornment agreement is a legally binding contract that establishes the relationship between a tenant, a landlord, and the landlords mortgagee (lender). It clarifies the rights of these parties, particularly if the property owner defaults on their mortgage. An example would involve a retail business leasing space in a building financed by a bank; this agreement ensures the lease continues if the bank forecloses on the property.
The importance of this agreement lies in protecting the tenant’s leasehold interest. It ensures the tenant can continue operating their business without interruption, even if the property changes ownership due to foreclosure. Historically, these agreements have provided stability and predictability in commercial real estate transactions, fostering confidence among tenants investing in leased spaces. They benefit both the lender, who can more easily sell the property with existing leases in place, and the tenant, who avoids displacement and associated business disruptions.
