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Use and Enforcement of SNDAs In the Hotel Industry
With inflation reaching levels not seen in 40 years and interest rates on the rise, combined with reports that delinquency rates for lodging properties remain well above pre-pandemic levels, there is a persistent risk that a significant number of hotel properties will enter foreclosure in the next 12 months — especially in the face of continuing economic headwinds and the looming threat of a recession.
This article examines the agreement — known as a Subordination, Non-Disturbance and Attornment Agreement (SNDA) — typically used by hotel lenders, owners and managers to set forth their respective rights upon a foreclosure, and consider disputes that may arise when a party seeks to enforce its SNDA rights.
What Is an SNDA?
An SNDA is originally a creature of commercial real estate lending involving a property with existing tenant(s). In that context, the SNDA was devised as a mechanism to establish privity of contract between a lender and a tenant — which parties otherwise, in contrast to a landlord and lender (through the loan documents) and a landlord and tenant (through the lease), have no contractual relationship — and set forth their respective rights upon a loan default.
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