Commercial Lease Subordination and Non-Disturbance Agreement

Often a landlord will produce their standard lease for a tenant's signature. The lease is usually twenty to thirty pages long with terms that are often unfamiliar to the tenant. In most cases, the tenant executes the lease and has no idea what they have given to the landlord.

The Subordination and Non-Disturbance Agreement is an example of terminology that may confuse the tenant and is generally overlooked. When a tenant and landlord execute a lease the lease may also be designed to protect other parties that have an interest in the real estate. Primarily the lender will require that the landlord protect the lender's interest and this is often done with a Subordination and Non-Disturbance Agreement.

The Subordination clause usually gives the tenant lease protection than the lender has. The lender's loan requires that the landlord prepares a lease that forces the tenants to subordinate the leasehold rights to the lender. In most cases, the landlord will not remove this language from the lease.

A workaround that can lessen the blow is to insert a Non-Disturbance Agreement into the lease. This clause will acknowledge the lender's subordination rights however it also requires the lender to honor the tenant's leasehold rights.

The best way to accomplish this goal is to address it in the lease but to also ask the lender to execute a separate Non-Disturbance Agreement that is attached as an exhibit to the lease.

All of these actions require the assistance and guidance of a qualified attorney. Make certain that your attorney practices real estate law and is familiar with local real estate practices.

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