Subordination, Non-Disturbance and Attornment Agreements in Hotel Financing: Lender Protections, Risk Mitigation

Description

SNDAs are used when a party other than the owner occupies or uses the real estate secured by the lender's loan. In the context of hotel lending, an SNDA is typically a tri-party agreement between the hotel owner, hotel operator, and the hotel lender. The agreement spells out each party's respective rights in the event of a default under the loan documents.

SNDAs and HMAs present unique considerations for hotel lenders because these agreements can potentially alter or modify terms in the underlying loan documents to the detriment of the lender.

When providing financing, a hotel lender will want the SNDA agreement to require a hotel manager to subordinate their rights under the HMA to the lender's mortgage or security interest in the event the hotel owner defaults on the loan. The lender will also want the SNDA to require that the lender maintains control over all deposit accounts.

The lender will also want the SNDA to ensure that the lender maintains control over the hotel and its assets during a foreclosure process, and that the lender or a subsequent owner can step into the role of the owner under the HMA. Further, the SNDA should indicate that the lender has no obligation to pay unpaid management fees and that the hotel manager will not exercise its remedies under an HMA for an owner's default without providing the lender adequate time to cure the default.

Listen as our expert panel reviews the structure and purpose of SNDAs in hotel financing and provides tips for negotiating these agreements to ensure the lender's interests are protected.