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How to: Navigating estoppel letters and SNDAs


How to: Navigating estoppel letters and SNDAs


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What to look for depends what side of the table you are on

By Anne Wal

Estoppel letters and a subordination, nondisturbance and attornment agreement are critical documents for leasing and obtaining financing where the collateral will be a multitenant commercial property.

But whether one is the lender, tenant or landlord, perspectives on what to look out for will vary greatly.

Estoppel letter

An estoppel letter is a written statement from a tenant that benefits third parties, such as a prospective buyer or lender, that are not privy to the landlord/tenant relationship.

Such a letter typically is requested when a multitenant property owner is selling or obtaining financing. The effect of an estoppel letter is to bind the tenant to statements of fact on which a prospective buyer or lender can rely.

From the lender’s perspective, it wants assurance about the terms of the leases and the certainty of the rent payment streams. Therefore, an estoppel letter from a tenant in favor of the lender is necessary to confirm the business terms of the lease, as well as to confirm that the tenant has no immediate right to terminate the lease, to set off amounts from rent or to seek damages against the landlord.

From the tenant’s perspective, it will want to negotiate as part of the lease the form of estoppel letter it will deliver when requested by a lender or a prospective buyer of the property. In this way, the tenant can make certain that only statements of business terms are included in the estoppel letter, such as rent, the security deposit and the term.

A tenant should object to including other statements that are expressly stated in the lease and which can be determined by a thorough review by a lender, so there are no misstatements in the estoppel letter, which could trump the lease. If the form of estoppel letter is included in the lease, then a short window of 10 to 15 days to deliver the signed estoppel letter to a lender is feasible. Otherwise, a tenant should request at least 30 days to complete and deliver the estoppel letter.

From the landlord’s perspective, the delivery of an estoppel letter from its tenants is critical to the process of obtaining financing. Although the landlord will deliver copies of leases affecting its property to the lender, a lender will want written confirmation from tenants confirming if there are any amendments to the lease, the amount of monthly rent currently being paid, the amount of the security deposit, the status of any tenant build-outs, the term of the lease and if there is any default under the lease.

Because the timing of financing is critical, the landlord will want tenants to timely return the signed estoppel letters. Accordingly, a landlord will include a requirement in the lease that a tenant return a completed estoppel certificate within a certain time period, such as 10 or 15 days. If the tenant does not return a completed estoppel certificate within that time period, a lease may provide that landlord can sign and deliver the estoppel certificate as tenant’s attorney-in-fact. A landlord may also include in the lease that tenant’s failure to timely deliver an estoppel letter is a default, or that tenant is liable for damages if landlord’s sale or financing does not occur because of tenant’s failure to deliver an estoppel letter.


A subordination, nondisturbance and attornment agreement, or SNDA, is three agreements in one.

First, there is subordination: The lien of a lender/mortgagee is superior to the lien of the lease. Second, there is nondisturbance: If the landlord defaults and the foreclosure process is completed, the lease stays in force as long as the tenant is not in default. Third, there is attornment: The tenant agrees to recognize the lender/mortgagee, or other party who obtains the property through a sheriff’s sale that is confirmed by a court, as landlord.

From the lender’s perspective, a lease should require a tenant to provide an SNDA upon request. Aside from the subordination, nondisturbance and attornment requirements, the SNDA requires a tenant pay rent to a lender upon notice from the lender that the landlord is in default and that no amendment to the lease can be made without the lender’s consent. Typically, the SNDA provides that there is no requirement for the lender to fulfill the landlord’s obligations under the lease, including completing any construction obligation or paying for improvement allowances not already paid by the landlord.

From the tenant’s perspective, without an SNDA there is no protection if a landlord’s lender forecloses its mortgage lien. The lender, or the successful purchaser at a foreclosure sale, could then terminate the tenant’s lease.

While it may be unlikely that a successor landlord would want to terminate existing leases, it remains a possibility in a volatile real estate market where the rental rate in the lease is lower than the market rate when the successor landlord acquires the property.

A tenant should request the form of SNDA in connection with negotiating the lease (and that the SNDA be recorded), and require more than the typical subordination/attornment provisions in the lease. If the lease has a long term with expensive improvements, a tenant should insist that there be a nondisturbance clause in the lease.

From the tenant’s perspective, an SNDA should insure that any lender/mortgagee will assume the obligations of landlord under the lease, such as completing unfinished construction of tenant improvements, and require that a lender be subject to offsets a tenant may have against the landlord.

For the tenant’s protection, an SNDA also should require assurance that the security deposit will be returned and require that any separate option that tenant has to purchase the property be maintained. Finally, the tenant should request a provision in the lease that requires the landlord to reimburse the tenant for its legal fees in connection with the review and execution of the SNDA, and that it be given at least 30 days to complete its review and execution.

From the landlord’s perspective, the property is more valuable to lenders if leases are subordinate to a mortgage. Therefore, the lender should include in its lease self-serving language regarding subordination and attornment, along with a requirement that the tenant sign a lender’s form of SNDA within 10 to 15 days.

While a tenant may want to include the form of SNDA as an attachment to the lease, the downside is the lender may find the form unacceptable and require a different form to be signed by the tenant.

Anne Wal is a shareholder in the real estate, construction law and banking, bankruptcy and business restructuring sections of von Briesen & Roper SC, Milwaukee.


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