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Subordination Agreements

Subordination - How to Protect Lender and Tenant Rights

Lease subordination is a necessary procedure in many cases in order to lease rental property that has a loan involved. A subordination, non-disturbance, and attornment agreement (SNDA) addresses the rights of lenders, such as a mortgage company, and tenants. A tenant cannot be forced to sign a lease subordination agreement, however, the tenant is typically not in a position to refuse to sign the subordination of lease.

A subordination non-disturbance and attornment agreement is really several agreements in one. The following describes the mortgage subordination agreement form:

  • The subordination clause apportions the priority of rights between tenants and lenders. Subordinating deals with making something lesser in priority, such as a tenant's claim on property with a mortgage lien already on it. By creating a lease subordination agreement, mortgage companies are protecting their interests in the rental property, making sure their claims are paid first, ahead of any tenant's claim. In a lease subordination clause, the tenant is agreeing to allow his/her interest to be subordinated to the lender's. A sample subordination agreement is commonly requested of new tenants.

  • The non-disturbance agreement assures the tenant the right to the premises in case the landlord defaults on the loan and the lender forecloses. A non disturbance agreement is to protect a tenant's rights to occupy the premises in the event of a foreclosure.

  • The attornment agreement has the tenant agree to continue lease obligations to a new landlord in the event of a foreclosure. The word attorn as used in a nondisturbance and attornment agreement means to acknowledge a new owner as one's landlord. In a subordination and attornment agreement, the tenant is confirming his or her obligations under the lease in the case of a transfer of ownership.

These are the main areas of lease subordination forms, although a subordination of lease may contain other details. The subordination agreement sample forms offered by US Legal Forms offers are professionally drafted to make subordinating a loan simple to do without the need for hiring an attorney and paying expensive legal fees. You can also preview a sample subordination non-disturbance and attornment agreement before downloading.

It is very common for the borrower to be required to pay a subordination fee when applying for a second loan on property already subject to a mortgage. However, in this subordination agreement mortgage lenders are assigning priority between mortgage liens. It is a different situation, as it involves subordination of mortgage liens between lenders, as opposed to a subordination and non-disturbance agreement between a tenant and lender. The subordination nondisturbance and attornment form a tenant signs is a way for a lender to assure continued rent payments in the event of a foreclosure and change in ownership. Non-disturbance subordination and attornment forms also provide the tenant the right to continue to occupy a rental premises if there is a new landlord due to sale in foreclosure.


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