Posted by John Merchant on December 03, 2002 at 04:28:34:
OK, I understand now what you want, but would sure recommend you retain local lawyer to help you here.
Different states have different mechanisms that would get you “Noticed” with a foreclosure action by ANY mortgage holders (existent and/or future) if you gave them legal notice of your interest, and as you point out, this could be done with your own Deed of Trust or mortgage doc, securing the RE owner’s promise to pay his mortgage note (and other RE expenses, and liens, etc.) as scheduled and promised by RE owner.
But, again, unless you deal with the legal elements of RE mortgages, liens, etc., in your state daily, as practicing lawyer, you’re handicapping yourself by not bringing in specialist.
Lessee’s rights vs lienholder? - Posted by James Buster
Posted by James Buster on December 02, 2002 at 20:13:00:
Are leaseholds extinguished by a lienholder’s foreclosure? What defenses, remedies, or contractual language may a performing lessee employ to resist eviction in such a case?
The priority relationship that exists between a lease and a mortgage usually depends upon the order in which they are delivered and recorded, unless their priorities have been altered by a subordination agreement. In large developments–like a shopping center–subordination agreements are frequently negotiated carefully because the priorities of the leases and mortgages are very important to the parties involved.
In absence of a subordination clause, foreclosure of a senior mortgage will usually destroy all leases subordinate to it (unless provision is made for “nondisturbance” of the tenant by the foreclosure purchaser).
The language of your lease will thus control–did you have any subordination agreement? nondisturbance langauge? Other provision in case of foreclosure?
Re: Lessee’s rights vs lienholder? - Posted by John Merchant
Posted by John Merchant on December 02, 2002 at 20:51:24:
Lienholder would certainly be ahead of the lease, and about all the lessee could do to protect himself is to pay off the lienholder and thereby be “subrogated” to the lienholder’s position. Being BOTH the lessee and lienholder would certainly give tenant/lessee a very strong position in the RE.
Re: Lessee’s rights vs lienholder? - Posted by Nate(DC)
Posted by Nate(DC) on December 03, 2002 at 22:30:26:
Let me try to explain it a little more detailed.
3 parties in this transaction:
Lender
Borrower
Tenant
let’s assume for sake of ease that it’s one tenant.
Borrower owns property leased to Tenant. Borrower then applies to Lender for a loan. Lender requires, as a condition of making the loan, that Borrower, Lender, and Tenant execute what is commonly called, as John said, a “Subordination, Nondisturbance , and Attornment Agreement” (SNDA for short), wherein:
Tenant and Borrower agree to subordinate the pre-existing lease between the two, to the new loan (Subordination)
AND
Lender, in return, agrees with Tenant that it will not disturb Tenant’s use of the premises, in accordance with the lease, in the event Lender forecloses and becomes the owner (Nondisturbance)
AND
Tenant agrees that it will essentially permit Lender to become its new “landlord” if Lender owns the property after a foreclosure…i.e. it will pay rent and obey all the other lease covenants, in exchange for being left in place (Attornment)
The SNDA is a separate document - not part of the lease - so it remains in place after the foreclosure. In fact, the whole point of the SNDA is to discuss what happens in the event of foreclosure.
Re: Lessee’s rights vs lienholder? - Posted by John Merchant
Posted by John Merchant on December 02, 2002 at 22:32:54:
Define Performance Mortgage please; and if you’re talking about creation of a NEW mortgage, then you’ve completely lost me. I thought you were trying to protect lessee’s rights against existing mortgage holder. If this is true, then what value would a new mortgage, of any kind, be to you?
Re: Lessee’s rights vs lienholder? - Posted by James Buster
Posted by James Buster on December 04, 2002 at 16:28:53:
Can nondisturbance agreements be acquired after the fact? Let’s say I have an an opportunity to acquire a sandwich lease. Being protected from the property owner’s problems, such as a bankruptcy (not likely, but stuff happens), would be desirable.
Re: Lessee’s rights vs lienholder? - Posted by James Buster
Posted by James Buster on December 03, 2002 at 01:21:31:
I am interested in protecting lessee’s against existing lienholders. Protection from future lienholders, especially of the stealth variety (medicare, forfeiture) is also important.
A mortgage can secure the performance of any agreement, not just a promissory note. A performance mortgage can secure the lessor’s performance of a lease, for example.
Re: Lessee’s rights vs lienholder? - Posted by Nate(DC)
Posted by Nate(DC) on December 05, 2002 at 24:21:54:
A SNDA is typically executed between the lender, owner, and tenant and deals with foreclosure. I think you are changing your question. Original question was lessee’s rights vs lienholder, now it’s lessee’s rights vs landlord. Anyway…if the landlord’s BK filing did not cause a foreclosure, the SNDA would not be relevant. And if the tenant continues to pay rent during the landlord’s BK (which it had better do, as landlord’s BK is not a defense against paying rent) and the landlord continues to make the mortgage payments with tenant’s rent (which it had better do, as rent skimming is a crime), there may not be a foreclosure.
As to whether you could acquire the benefits of the previously negotiated SNDA, by purchasing Tenant’s interest, would depend on whether or not the SNDA was assignable. I would imagine that even if it were not, you might be able to get all the other parties to agree to draft one with you, if it were a condition of your buying Tenant’s interest and it were in the interest of the other parties to allow you to do so. Since you’ve been quite vague on the facts of your case I have no idea if those circumstances apply here.