What is Attornment
Attornment is the act of granting authority or jurisdiction to a party even though no legal rights exist.
BREAKING DOWN Attornment
Attornment most commonly relates to laws regulating real property and is designed to acknowledge the relationship between the parties in a transaction. For example, attornment may occur when a tenant leases an apartment only to have the owner change during the course of the lease The attornment agreement does not create a new set of rights for the owner unless it is signed by the tenant. If the tenant refuses to sign, the landlord may be able to use this as grounds for eviction.
Attornment in commercial leases
Commercial leases often contain a subordination, non-disturbance and attornment agreement (SNDA). This is an agreement between a tenant and landlord that describes specific rights of the tenant, landlord, and other third parties such as the landlord’s lender or a purchaser of the property. There are three parts: the subordination clause, the non-disturbance clause and the attornment clause. Attornment in a commercial lease is when a tenant acknowledges a new owner of the property as the new landlord. The purpose of the attornment clause in an SNDA is to obligate the tenant to recognize any new owner of the property as its landlord, whether the new owner acquires the property in a normal sale or following a foreclosure. The main goal of the clause is to ensure that the tenant continues paying rent to the new landlord throughout the remainder of the lease term, even if the property is foreclosed or sold.
In the subordination clause in an SNDA, the tenant agrees to allow their interest in the property to become junior to the interest of a third-party lender. The landlord may want to use the commercial property to secure financing after entering into a lease with a tenant, and most lenders would require any tenants to subordinate their leasehold interests to the lender’s mortgage interest. The subordination clause gives the third-party lender the option to terminate the lease in the event of commercial foreclosure. A non-disturbance clause or agreement gives a tenant the right to continue occupying the leased premises as long as the tenant is not in default, even after the property is sold or foreclosed. The non-disturbance clause is in support of the tenant so their rights to the premises will be preserved even if the landlord does not meet mortgage obligations and the property is foreclosed.