Kentucky Subordination, Non-Disturbance, and Attornment Agreement (SODA) is an essential legal document used in commercial real estate transactions involving a tenant, landlord, and lender. It outlines the rights, obligations, and priorities of each party with respect to the lease in the event of default or foreclosure on the underlying commercial loan. A SODA in Kentucky ensures that the lender's interests are preserved while also providing the tenant with certain protections. The agreement typically consists of three key components: subordination, non-disturbance, and attornment. 1. Subordination: Subordination refers to the tenant's agreement to subordinate its lease rights to the lender's mortgage or deed of trust. This means that if the lender forecloses on the property, the lease is considered lower in priority compared to the mortgage. By subordinating their lease, tenants acknowledge that the lender's rights take precedence over their leasehold interest. 2. Non-Disturbance: The non-disturbance clause aims to protect the tenant's rights even in the event of foreclosure. It establishes that as long as the tenant fulfills their lease obligations, their rights will not be disturbed by the actions of the lender or a new property owner resulting from foreclosure. Therefore, even if ownership of the property changes hands, the tenant's lease stays intact. 3. Attornment: Attornment is the tenant's agreement to recognize and acknowledge a new entity as the landlord in case of foreclosure. It ensures that the tenant will continue to pay rent and adhere to the lease terms under the new landlord, even if the lender becomes the new owner of the property. This provision guarantees a smooth transition of the tenant-landlord relationship. Different types of Kentucky SODA agreements may vary based on the specific terms negotiated by the parties involved. Some common variations include: 1. Limited SODA: This type of SODA agreement may include certain limitations or specific provisions tailored to meet the needs of a particular lease or loan. It addresses unique circumstances while still adhering to the core subordination, non-disturbance, and attornment principles. 2. Reciprocal SODA: In cases where both the tenant and landlord have loans against the property, a reciprocal SODA is used. This agreement ensures that both lenders have a mutually agreed-upon priority in case of foreclosure, protecting the interests of both tenants and landlords. 3. Explicit SODA: An explicit SODA explicitly states the conditions required for the tenant's non-disturbance protection. It may outline specific requirements, such as timely payment of rent, adherence to lease terms, or maintenance obligations, to guarantee the tenant's continued occupancy despite the property changing hands. In summary, a Kentucky Subordination, Non-Disturbance, and Attornment Agreement of a Lease provides a framework to protect the rights and interests of tenants, lenders, and landlords in commercial real estate transactions. It ensures that all parties can navigate potential foreclosure scenarios while maintaining the stability and continuity of the tenant's lease.
Kentucky Subordination, Non-Disturbance, and Attornment Agreement of a Lease regarding a Commercial Loan
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FAQ
The attornment clause requires tenants to acknowledge any new owner of the property as the landlord.
An SNDA primarily sets out the understanding between the parties concerning their respective liens and their rights and obligations to each other if the lender exercises its foreclosure rights under the mortgage. An SNDA generally includes: The tenant's subordination of its lease to the mortgage.
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.
A nondisturbance clause is a provision in a lease prohibiting the lessor from disturbing or interfering with the lessee's use of the premises, providing such use is NOT in violation of the terms of the lease.
SDNA stands for Subordination Non-Disturbance and Attornment. It essentially guarantees that if the landlord defaults, neither the landlord nor the lender can cancel a tenant's lease. Each individual word references a separate provision; some lenders may desire some provisions and not others, depending on their goals.
A nondisturbance clause is a provision in a mortgage contract that ensures that a rental agreement between the tenant and the landlord will continue under any circumstances. This is done primarily to protect the renter from eviction by the mortgagor if the property is foreclosed upon by the lender.
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.