Arizona Subordination, Non-Disturbance, and Attornment Agreement of a Lease (SODA) is a legal document applicable in the state of Arizona, ensuring protection for both lenders and tenants in commercial real estate transactions. This agreement typically arises in the context of a commercial loan, where the lender requires the tenant to sign an SODA as a condition to obtaining a loan secured by the property. The purpose of an SODA is to establish the rights and obligations of the lender, tenant, and the landlord in the event of default, foreclosure, or other circumstances that may impact the lease. Keywords: Arizona, Subordination, Non-Disturbance, Attornment Agreement, Lease, Commercial Loan, Tenant, Lender, Foreclosure. Different Types of Arizona Subordination, Non-Disturbance, and Attornment Agreements include: 1. Subordination Agreement: This type of SODA outlines the tenant's agreement to subordinate their leasehold interest to the lender's lien or mortgage. In essence, the tenant acknowledges that the lender's interest in the property takes precedence over their leasehold rights. 2. Non-Disturbance Agreement: This agreement ensures that the tenant's rights will not be disturbed by the lender in the event of a foreclosure or default by the landlord. It provides the tenant with assurance that they can continue occupying the premises under the terms of their lease despite any action taken by the lender. 3. Attornment Agreement: This agreement establishes the tenant's obligation to recognize and attorn to a new landlord in the event of a foreclosure or change in ownership of the property. The tenant agrees to maintain the terms of the lease with the new landlord, ensuring continuity of the lease and protecting both the tenant's rights and the lender's collateral. The Arizona Subordination, Non-Disturbance, and Attornment Agreement of a Lease regarding a Commercial Loan is crucial for all parties involved in a commercial real estate transaction. It safeguards the interests of the lender by establishing subordination, while also providing the tenant with assurances of non-disturbance and protection through attornment. By addressing these key aspects, an SODA helps maintain stability and clarity in lease agreements, even during turbulent financial situations or changes in property ownership.
Arizona Subordination, Non-Disturbance, and Attornment Agreement of a Lease regarding a Commercial Loan
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Attornment in a commercial lease is similar. The attornment clause in an SNDA obligates the tenant to recognize the new owner of the property as its landlord regardless of whether the new owner acquired the property through a normal sale or a foreclosure.
The Subordination Clause A subordination is a contractual agreement by the tenant that its leasehold interest in the collateral property, or portion thereof (the subject property of the lease), is subordinate either to the mortgage or to the lien of the mortgage.
The Subordination Clause. A subordination clause is a lease provision whereby the tenant subordinates its possessory interest in the leased premises to a third-party lender, usually a bank (the rights of the tenant are thus subject to the rights of the lender).
Understanding Subordination Clauses When you get a mortgage loan, the lender will likely include a subordination clause essentially stating that their lien will take precedence over any other liens placed on the house. A subordination clause serves to protect the lender if a homeowner defaults.
What is Subordination? Subordination is putting something in a lower position or rank. Therefore, a subordination agreement puts the lease below the mortgage loan in priority. Mortgage lenders want the leases to be subordinate to the mortgage. That way, the mortgage loan is paid first if there is a foreclosure.
The primary effect of an SNDA is that the tenant agrees to subordinate its lease to the mortgage in exchange for the lender agreeing not to disturb the tenant if the lender forecloses its superior security interest in the real property.
Key Takeaways. A nondisturbance clause in a mortgage guarantees than a tenant will not be evicted from a property that has been foreclosed on by a lender, or due to some other circumstance. Such a clause may apply to either a residential or commercial leaseholder and mortgagee.
The primary lender. If you go for the second mortgage, the subordination clause will ensure that the primary lender retains its priority over the second lender loses priority, superseding any other financial claims.