Most investment NNN property transactions include three parties – landlord, tenant, and lender. SNDA and Estoppels Agreement – Contractual documents between landlord and tenant and landlord and lender, should prescribe and protect the relationship and the rights of all of the three parties(leased property in nnn). SNDA and Estoppels, are 2 separate agreements that contain clauses, added to NNN property contracts(real estate transactions in nnn), that address common but important tripartite issues.
- SNDA is a single agreement that clubs three different clauses to form a document. It depicts the relationship, which the three parties are bound to share and states their rights(NNN property contracts). The acronym SNDA stands for Subordination, Non-Disturbance, and Attornment and its highlights are the following:
- Subordination: The tenant’s interest in the lease is subordinate to the mortgage interest of the lender, typically;
- Non-Disturbance: This clause in the NNN lease affords protections to a tenant from all other clauses in the contractual documents that affect the tenant(leased property in nnn). By virtue of this deed, the tenant can continue peaceful tenancy on the property even though the owner is changed and/or the property is foreclosing;
- Continuance of Tenant Rights until default: The clause is very important for a tenant whose business is in this kind of leased property, as a change of location will hamper the business. However, a tenant has to have good credit to enjoy the benefits of this clause.
- Attornment: The clause requires a tenant to accept the new owner of the property as the new landlord and pay rent, as prior, throughout the remaining lease term. Whether the property was sold or foreclosed should not affect the tenant’s responsibility for rent payment.
- The ESTOPPELS document contains certain other conditions and promises that both the tenant and owner need to abide by, so that no one party makes a wrongful claim.
Your advisors at the Triple Net Investment Group have arranged and structured hundreds of commercial real estate transactions and are intimately familiar with the investment implications of clauses and terms in NNN leases and contracts. Before proceeding further in your search for investment advisory, call or email the Triple Net Investment Group today.
