In simplest terms, SNDA and Estoppels agreements are 3 crucial addedum agreements or certificates in NNN property leases. People often overlook these whilst understanding or negotiating on NNN lease properties investments.
Three agreements – Subordination, Non-Disturbance, and Attornment, get combined into one single certificate establishing a legal contract between the tenant and the landlord’s lender. If and when the landlord ever defaults on the loan, then the lender is legally assigned ownership of the property through the foreclosure process(triple net lease property). SNDA agreements will then help the tenant to get access to and remain on the property and grant the lender the right to collect the rent from the tenant as well as administer and protect the value of the real estate – mimicking what the landlord would have done.
Among its three major components, the Subordination part allows the lender to garnish the property through foreclosure or other legal actions by “suborning” the tenants. In other words, the tenant needs to agree that the tenant’s own interest in the lease is subordinate or junior to the mortgage interest of the lender.
The second agreement – Non Disturbance – exists as an assurance to the tenants to stay peacefully and continue business as usual, on the NNN property even if the asset is foreclosed and the owner is changed. This is, in other words, for the protection of the tenants.
Attornment is the last document that creates a contractual bond between the tenant and the mortgagee in which the tenant has to accept the mortgagee as his or her new landlord. Additionally, the tenant also becomes liable to pay the remaining lease period rent to the new owner of the triple net lease property.
A document or certificate signed by the tenants, an Estoppel declares certain facts about the commencement date, security deposits, lease-term, the NNN property descriptions, etc(rent terms). This document also contains the information whether the rent is due and other nuances of rent terms. In other words, the Estoppel certificate must be signed by both the tenant and the current owner of the property in order to avoid any misunderstanding. This will also avert the possibility of claims against the tenant and the former owner of the real estate as it provides security to all the three parties – the tenant, the (former) landlord and the lender.
SNDA and Estoppels agreements are 3 crucial addedum agreements or certificates in NNN property leases.
With assistance of your expert real estate advisors at Triple Net Investment Group will help you cover all required documentation and close on any NNN lease transaction with confidence. Call today.
