Some Whys and Wherefores About SNDAs – Part 1

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I thought I understood a few things about Subordination, Non-disturbance, and Attornment Agreements (SNDAs) and could offer some answers until another attorney refused to allow a fully executed SNDA to be recorded because “it would encumber his client’s property.” I was and remain stumped. If anyone can figure out why he so insisted, please let this Ruminator know. I couldn’t figure out how this moderately experienced attorney in a firm with a decent size real estate practice would believe such a thing, let alone could I figure out how to respond. The lender freely granted an otherwise acceptable SNDA, fully expecting that it would be recorded. Send your answers or comments to www.retailrealestatelaw.com.

Now, for what I think I have figured out. [Read more…]

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Three Remaining Tenant Allowance Issues – A Wrap-up

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Here’s the wrap-up! We started the Tenant Allowance series on November 21 with seven questions and when posted Part 2 on December 4, we were left with three: (5) should the landlord get any part of the (Tenant Allowance) money back if the lease is prematurely terminated; (6) what happens if the landlord doesn’t pay the allowance; and (7) should the lender pay the allowance if it takes the property over before the money is paid? My answers: (5) yes: (6) offset; and (7) yes.

If I stop here, that would the shortest posting yet. So, I won’t.

Back in Part 1, I offered my view that Tenant Allowance monies are built into the rent – call it a ‘loan component.” If there were no Tenant Allowance, the rent would be lower. That’s because when a landlord pays a Tenant Allowance, the landlord is renting more than “space,” it is also renting money. The incremental rent to “recapture” the Tenant Allowance is spread over the initial term of the lease. A lot of tenants don’t pay attention to this “fact” or just don’t care, because it is fairly common for the “increment” to continue into renewal periods even though no new money will be advanced at the time of their lease renewal. Others are quite savvy and do care. In those cases, the renewal rents are negotiated with the knowledge that the rent for the initial term was “jacked up” to cover the Tenant Allowance. In a much smaller number of cases, a landlord actually advances more Tenant Allowance at renewal time, most often in the case of restaurants where remodeling is common at renewal time. [Read more…]

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Exercising a Renewal Option or SNDA When In Default – Why Not?

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This will not be politically correct, and you can throw this back to me when you see me on the landlord’s side of a lease or the lender’s side of an SNDA. I’ll take that risk because I live by the overriding principle that everything is “bargaining power, everything is priced into the rent or into the deal.” Therefore, fairness is not the deciding factor. Ethical behavior, moral behavior, lawful behavior, politeness – yes, these are all overriding factors, but leases and SNDAs allocate “risk” between the parties, and the topic of this blog entry is a particular kind of risk.

Those caveats having been expressed, I going to pretend that I’ve been hired to fill the role of King Solomon, but there is no baby to be found. I’m being asked to decide what is right or wrong. I take comfort that if the parties to a lease or SNDA decide to do what I think is “wrong,” they’ve “priced” it into the lease or the loan. That’s a convoluted way of saying that parties can accept lease or loan or SNDA provisions that are “wrong” or “unfair” if the overall deal is advantageous. Ralph Waldo Emerson is said to have written: “For everything you have missed, you have gained something else, and for everything you gain, you lose something else.” [Read more…]

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