A Florida Subordination, Non-Disturbance, and Attornment Agreement (SODA) is a legal document that outlines the relationship between a tenant leasing commercial property and a lender providing a commercial loan to the property owner. This agreement ensures that in the event of foreclosure on the property, the tenant's leasehold interest will be protected, and the tenant can continue occupying the premises. There are two main types of SODA agreements commonly used in Florida: 1. Subordination Agreement: In this type of SODA, the tenant acknowledges that the lender's mortgage or deed of trust takes priority over the tenant's lease. By agreeing to subordinate their leasehold interest, the tenant accepts that if the landlord defaults on the loan and the property is foreclosed, their lease may be terminated. Subordination protects the lender's interest in allowing them to deal with the property without interference from the tenant. 2. Non-Disturbance and Attornment Agreement: This type of SODA provides protection to the tenant by ensuring their lease won't be disturbed even if the property is foreclosed. The tenant agrees to recognize the lender as the new landlord upon foreclosure, known as attornment, and continue paying rent and fulfilling lease obligations to the new owner. Non-disturbance clauses prevent the lender, as the new landlord, from terminating the lease as long as the tenant is not in default. Florida SODA agreements often include the following essential provisions: 1. Identification of Parties: The agreement will clearly identify the tenant, lender, and property owner/landlord involved, along with their legal entities. 2. Lease and Loan Documentation: It will reference the lease and loan documents to ensure consistency and accuracy. 3. Subordination Clause: If applicable, the document will contain provisions that establish the tenant's agreement to subordinate their lease to the lender's security interest. 4. Non-Disturbance Clause: This clause guarantees that the lender will not disturb the tenant's occupancy rights in the event of foreclosure, as long as the tenant fulfills their obligations under the lease. 5. Attornment Clause: The tenant agrees to recognize the lender as their new landlord upon foreclosure or any other transfer of ownership, ensuring continuity of lease terms. 6. Notice Requirements: The agreement will specify how and when notice should be provided by the parties, offering a clear communication channel. 7. Remedies and Legal Covenants: It will detail the remedies available to each party in the event of a default or breach of the agreement provisions, including any legal fees and expenses. 8. Governing Law: Florida law governs the agreement, ensuring compliance with the state's legal requirements. Florida SODA agreements are crucial for commercial tenants and lenders as they protect the interests of both parties during a property foreclosure. By detailing the rights and obligations of all stakeholders, SODA agreements provide a transparent framework for the lease and loan relationship, ensuring stability in commercial real estate transactions within the state of Florida.
Florida Subordination, Non-Disturbance, and Attornment Agreement of a Lease regarding a Commercial Loan
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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.
Use Clauses This clause defines how the tenant can and can't use the property they're leasing. The use clause may be very specific, so it's important that you read its terms carefully.
The attornment clause requires tenants to acknowledge any new owner of the property as the landlord.
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.
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.
A rent escalation clause is a common provision in commercial lease agreements that allows for periodic rent increases over the lease term. The purpose of the clause is to adjust the rental rate to account for changes in market conditions, inflation, and the cost of living over time.
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.