What Is Attornment?
Attornment is the act of granting authority or jurisdiction to a party even though no legal rights exist. It applies mainly to real estate transactions and may occur when a tenant acknowledges a new owner of the property as their new landlord.
In the case of commercial property changing hands, an attornment clause in a subordination, non-disturbance, and attornment (SNDA) agreement requires the tenant to acknowledge a new owner as their landlord and to continue paying rent regardless of whether the property changes hands through a normal sale or a foreclosure.
- Attornment applies most often to real estate transactions.
- Attornment acknowledges the relationship between the parties in a transaction.
- Attornment may occur when a tenant leases an apartment and the building change hands to a new owner during the course of the lease.
- The attornment agreement only changes the rights of the new owner if it is signed by the tenant.
Attornment is most commonly associated with real property laws 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 lease. The attornment agreement does not create a new set of rights for the owner unless the tenant signs it. The landlord may be able to use a tenant's refusal to sign as grounds for eviction.
The clause in an SNDA dictates that if ownership changes, the new owner replaces the former owner in the lease and assumes all of the former owner’s rights and responsibilities. The clause also stipulates that the tenants must continue to pay rent regardless of who owns the property.
Attornment in Commercial Leases
Commercial leases often contain an SNDA. This is an agreement between a tenant and landlord that describes the specific rights of the tenant and landlord. The SNDA might also provide information on other third parties such as the landlord’s lender or the purchaser of the property. There are three parts:
- subordination clause (S)
- non-disturbance clause (ND)
- attornment clause (A)
Attornment in a commercial lease is similar. The attornment clause in an SNDA obligates the tenant to recognize the new owner of the property as its landlord regardless of whether the new owner acquired the property through a normal sale or a foreclosure. The clause also requires the tenant to continue paying rent to the new landlord for the remainder of the lease term.
In the subordination clause in an SNDA, the tenant agrees to allow their interest in the property to become subordinate to the interests 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. Therefore, 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 provides the tenant the right to continue occupying the leased premises as long as they do not default. The tenant can lease the premises even after the property is sold or foreclosed. The non-disturbance clause supports the tenant rights to the premises even if the landlord does not meet mortgage obligations and the property is foreclosed.