Tenant Non Disturbance Agreement

In August 2014, Purenergy Wellness Lofts Corp. (the “tenant”) entered into a verbal agreement to lease premises at 333 Bering Ave Inc. (the “lessor”). After taking possession, the tenant carried out major renovations costing more than $154,000. On February 1, 2017, the parties entered into a written lease agreement (the “leasing”). In July 2016, the owner received a mortgage on the land of Cameron Stephens Financial Corporation (the “First Mortgagee”). A few months later, the lessor defaulted on the mortgage and the First Mortgage received a judgment for possession of the property. During the mortgage enforcement process, First Mortgagee and the Tenant reached an agreement that allowed the tenant to remain in possession of the premises while the terms of their agreement were in dispute. While most commercial tenancy agreements provide for the tenant to execute a “subordination, non-interference and attornment contract,” commonly referred to as “SNDA,” it would be difficult to explain the importance of an SNDA and why commercial lenders and tenants need it.

Non-disruption, as the name suggests, is the lender`s promise not to interfere with the tenant`s right not to occupy the premises in the event of foreclosure. In many states, including Ohio, the enforcement of the mortgage automatically terminates the lease, unless the lease is superior or the mortgagee has expressly agreed that the lease will survive. Non-interference agreements are generally combined with the confirmation of the tenant`s subordination and subordination obligations in an SNDA. The extent of incident protection will vary, which I hope will be discussed in a future article. Attornment is a stay of feudal law when the law has considered the relationship between the landlord and the tenant as personal. Attornment is the tenant`s agreement to become a tenant of a person other than the original landlord, who has now taken possession of the property. In a 1939 Ohio case, this doctrine was applied to exempt a tenant from the obligation to pay rent to his landlord`s lender after the forced execution of the mortgage, because the tenant had never polluted. New York Life Ins. Co. v. Simplex Products Corp., (1939) 135 Ohio St.

501, 21 N.E.2d 585. Commercial owners regularly require subordination clauses in their leases in order to maintain the possibility of using the building as a loan guarantee. Most lenders prohibit commercial real estate from being used as collateral for a loan, unless their mortgage rates are higher than the rental rates of all tenants. In other words, the lender has the option of terminating the tenants` tenancy agreement in the event of a commercial foreclosure. In the absence of such a clause, the tenant could lose the use of the surface as well as his investments in renovation work to promote his activity on this property. Some lenders may attempt to limit the obligations in a non-interference clause to allow the tenant to remain in the space under agreed tenancy conditions. If you`re a lender, you have just as many reasons to want an SNDA. Depending on the date of signing the lease and what the lease says, the mortgage cannot give you a first full right of bet against the property. Although the lease stipulates that the tenant`s rights are subordinated to all current and future mortgages, this subordination is often conditional on the lender making an acceptableNDA available.