Attornment: Definition, Mechanism, Types, and Practical Examples
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Summary:
Attornment involves granting authority or jurisdiction to a party in real estate transactions, notably when a tenant acknowledges a new property owner as their landlord. The process often occurs in an SNDA agreement, shaping the relationship between parties and preserving tenancy during property ownership changes.
Understanding attornment
Defining attornment
Attornment, primarily within real property laws, acknowledges the relationship between parties in a transaction. It commonly occurs when a tenant leases a property, and the property changes ownership during the lease period. However, an attornment agreement does not modify the owner’s rights unless the tenant signs it. A refusal to sign might become grounds for eviction.
Attornment in SNDA agreements
In real estate transactions, an SNDA clause stipulates that during a change of ownership, the new owner takes over the former owner’s rights and obligations. Notably, tenants are bound to continue paying rent, irrespective of property ownership changes.
Attornment in commercial leases
Components of SNDA
Commercial leases often contain an SNDA agreement with three crucial clauses:
- Subordination clause (S)
- Non-disturbance clause (ND)
- Attornment clause (A)
Role of attornment in commercial leases
The attornment clause in an SNDA mandates tenants to acknowledge the new property owner as their landlord, regardless of acquisition through sale or foreclosure. This clause necessitates rent payment continuation for the remaining lease term.
Understanding SNDA clauses
The subordination clause makes the tenant agree to subordinate their interest in the property to a third-party lender’s interests, often for financing purposes. It grants the lender the ability to terminate the lease in case of commercial foreclosure.
The non-disturbance clause ensures tenant occupancy rights even if the property changes hands due to sale or foreclosure, provided the tenant doesn’t default.
Types of Attornment Clauses
Attornment clauses in SNDA agreements can take various forms based on specific transactional needs:
- Absolute Attornment: Where the tenant must acknowledge any new owner as the landlord, regardless of the circumstances of ownership transfer.
- Conditional Attornment: Typically allowing the tenant to withhold attornment unless certain conditions or guarantees are met.
- Equitable Attornment: Allowing for the tenant to receive certain rights or remedies in case of non-fulfillment of obligations by the new owner.
Frequently asked questions
What happens if a tenant refuses to sign the attornment agreement?
A tenant’s refusal to sign the attornment agreement might serve as grounds for eviction, allowing the landlord to terminate the lease.
How does an SNDA protect tenants in commercial leases?
An SNDA safeguards tenants by ensuring continuity of tenancy and rent payment obligations, even if the property changes ownership through sale or foreclosure.
Key takeaways
- Attornment acknowledges the relationship between parties during property ownership changes.
- An SNDA safeguards tenant rights and obligations in commercial leases.
- A refusal to sign the attornment agreement might lead to eviction.
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