Understanding SNDA’s

Last Updated on Sunday, 27 August 2023 02:54 Written by Chris Griswold Friday, 11 May 2018 12:07

SNDA’s (Subordination, Non-Disturbance and Attornment Agreements).  What are they?  What do they do?  Who needs them?  When?  Good stuff.  See more below (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Understanding SNDA’s

Question #1:  So what is an SNDA?

Answer:  It’s an agreement entered into by and between the tenant and landlord’s lender that basically allows the tenant to remain operating in their leased premises should their landlord become insolvent.  In return for the lender’s agreement not to disturb the tenant’s operations, the tenant agrees to “attorn” to the lender as its new landlord.  Lastly, the tenant agrees to subordinate (i.e., subject) their leasehold estate interest to the lender’s security interest in the leased premises thus making the lender’s securitization in the leased premises superior to tenant’s leasehold interest in the leased premises.

Question #2:  So what is the main benefit of having an SNDA in place for a commercial tenant?

Answer:  It will ensure that the commercial tenant’s business operations won’t be negatively affected by a landlord’s financial distress.

Question #3:  Do SNDA’s change the nature of the new landlord/tenant relationship existing between tenant and lender?

Answer:  Probably so.  SNDA’s usually have certain “carveouts” in place which will either diminish the obligations and/or enhance the rights of the lender under this new landlord/tenant relationship – depending upon the relative bargaining power of the parties.  For example, if the lender is in a stronger bargaining position than the tenant, the lender (as the new LL) will have additional time (on top of that granted to the original landlord under the lease) to cure certain defaults of the original landlord.  Furthermore, if the lender has the stronger bargaining position, the SNDA will usually contain language that lender will not be responsible for certain defaults of the original landlord which occurred during the original landlord’s march towards bankruptcy.  The document may also limit the repairs and maintenance that lender is required to perform (as compared to the repairs and maintenance that the original landlord had to perform under the lease).  The document could also attempt to diminish the lender’s liability to tenant as relating to property casualties and personal injuries which occur on the demised premises or the shopping center.  Accordingly, it’s always a good idea to consult counsel prior to entering into a subordination agreement.

Question #4:  When should a commercial tenant think about entering into the SNDA agreement with the landlord’s lender?

Answer:  Remember, an SNDA is only useful if it is entered into prior to your landlord’s insolvency – you can’t enter into one after landlord’s insolvency and back date its effectiveness to an earlier point in time.  Accordingly, the SNDA issue is one to address, if at all possible, up front during the negotiations which precede the execution of the lease.  Otherwise, the sooner the better….

What My Clients Are Saying

 “Chris Griswold is a good business attorney whom I’ve used often and much through the years, for both my business and personal needs, and whom I’d gladly refer to anyone.  He’s creative, prompt, eager to help and very competent.  He’s good at what he does, he has fun doing it, and it shows up in his work through his good problem solving skills.  I look forward to a continued relationship with Chris.”
Edward F. Wells / President, Wells Nelson & Associates / Oklahoma City, Oklahoma

Leases v. Licenses v. Easements

Last Updated on Sunday, 27 August 2023 02:54 Written by Chris Griswold Friday, 13 April 2018 09:06

Knowing the basics pays dividends.  At some point, it will make a big difference in the outcome of one of your deals.  Accordingly, we’re going to review some of the basic differences between leases, licenses and easements.  Why?  Each vehicle has its own different strengths/weaknesses and I’ve seen each used within the wrong context.  Read more below….

Leases v. Licenses v. Easements

Absent certain language within the document and/or certain special circumstances, the foregoing table quickly summarizes the basic, legal discrepancies between each type of vehicle.  What practical effect do these differences have on you?

Parking Situations:  I’ve seen property owners grant easements to other adjoining property owners for parking space.  While this may sometimes be in the best interests of the granting property owner, it’s usually not.  Why?  Easements are not usually revocable and are usually perpetual (which makes the issue of whether they’re assignable moot).  This all makes granting a parking easement a little risky since you might not like the future owners of the adjoining property.  Instead, you’d probably want to use either a lease or a license – depending upon the situation.

Vacating Right of Ways:  I’ve seen back-to-back property owners discuss the possibility of jointly vacating an alley (which would result in each property owner getting back their half of the alley) just to overlook the possibility that, unless they enter into a “reciprocal easement agreement” at the time of vacation, the other property owner could ostensibly fence off their half of the alley thereby constructively blocking off the other’s access to the back of their building (depending on the width of the alley).  In other words, granting each other mutual leases or licenses upon the other’s land won’t long-term protect either them or their respective successors (since neither a lease nor a license is perpetual in duration).

Snowcone Stands, Parking Lot Nurseries, Christmas Tree and Pumpkin Lots:  The big things here are: 1) seasonal/temporary use, and 2) your familiarity with the operators.  It’s okay for a property owner to grant a lease to an operator they’ve done business with for years for a 6 month term (i.e., Spring through Summer) to sell plants or to serve snow cones.  However, it’s likely unwise to grant a lease to a new and unknown operator who wants to sell pumpkins for just a few weeks.  Why?  As a property owner, you won’t mind granting the lease with a hard, irrevocable, 6 month term to the repeat operator, but, with the new operator who only needs the space for a month or so, you’d probably want to use a license in order to retain the right to quickly revoke an unworkable/undesirable situation – especially since the term is so short….

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“I take special care when selecting business partners to represent my company and look for those who exhibit the same levels of professionalism and integrity that I try to achieve.  Chris Griswold definitely meets these requirements and is considered a very valuable member of the JOBO Properties team.  I have no hesitation in recommending Mr. Griswold to handle your business and commercial real estate transactions.”

Darren Ford / Owner & Developer of JOBO Properties, L.L.C. / Oklahoma City, Oklahoma

To Record Or Not To Record

Last Updated on Sunday, 27 August 2023 02:53 Written by Chris Griswold Thursday, 3 August 2017 01:59

Listen up landlords and tenants.  There is a rhyme and a reason to recording (and not recording) leases in the land records of whatever relevant county.  This should be helpful for everyone… (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

To Record Or Not To Record

A question that comes up over and over again in my practice (from clients and opposing attorneys alike) is whether a lease document should be recorded in the relevant county’s real property records office (usually, the County Clerk’s Office).  Specifically, people ask “what difference does it make whether the lease document is recorded?”  Well, to answer this question, we must ask a couple more questions.

First, does the lease document contain sensitive information that you’d rather not be within the public domain?  Remember, if the lease document is recorded in the public records, the lease document and all the information within it will become public information.  So, for example, if the amount of rent you’re paying is set forth within the lease (and it usually always is stated within the four corners of the lease document) and you don’t want other industry competitors knowing how much you’re currently paying, or, more importantly, how much you will be paying in the future, then you might not want to record that lease.  Other factors to consider in arriving at whether you should or shouldn’t record would, among other things, be: i) any exclusive use provisions, ii) any required co-tenancy provisions, iii) any required minimum insurance policy limits, etc… which are expressly set forth within the lease.  Remember, if you don’t want someone else to know about all the terms of the deal that you’ve struck, then you probably don’t want to record the lease.

Second, is there another way (besides recording the actual lease document itself) to put the general public on notice as regarding the existence of the lease document?  Yes.  Parties to a lease usually agree to record what is called a “Memorandum of Lease” instead of the actual lease itself.  Why?  The Memorandum of Lease is a much shorter abstract of the lease document (usually only 1 or 2 pages) which still acts to put the public on notice as regarding the existence of the lease but doesn’t contain all of the sensitive information as set forth hereinabove.  So, with a Memorandum of Lease, you can still get the benefits that come with recording the lease document while retaining custody of the sensitive information contained within the lease document that you spent so much time negotiating over.

Accordingly, prior to recording any lease document, be sure to think through the questions set forth above.  More often than not, you’re better off not recording.

What My Clients Are Saying

Chris Griswold has always been proactive and professional.  He takes the time to work with us and tailors his approach to our situational needs.  My favorite thing about Chris is that he will let me know if there is an easier, less-expensive approach.  We look forward to working with him well into the future.”
Carl S. Milam / President / Western Concepts Restaurant Group / Oklahoma City, Oklahoma