Estoppel Certificates vs SNDA Agreements?

There’s a world of difference between an Estoppel Certificate and an SNDA Agreement, which stands for Security, Non-Disturbance and Attornment.  

The purpose of the Estoppel Certificate is to certify that all terms and conditions in the lease are in effect. It certifies to all parties (lender and buyer) there are no side agreements with regard to the lease. It eliminates financial surprises. 

An SNDA agreement is probably the most important agreement the dental tenant should have in a lease. It is an agreement between the landlord, lender, and tenant, that, in the event that the property goes into foreclosure, the new owner(s) must honor the existing lease. Typically, when a property goes into foreclosure, all leases are void and they must be renegotiated with the new owner. A new owner can hold the dental tenant hostage by offering exorbitant, over-market pricing, which would cost the dental tenant a ton of money, substantially decrease income, as well as decrease the value of the practice, if there’s an opportunity to sell. 

It is possible that the new owner may wish to repurpose the building, which would force the dental tenant to vacate. Should that occur, the dental tenant is in a world of hurt. Here’s why: Dentist is kicked out of the space, loses funds already spent on build-out, and has no way to repay future loan installments.  

No lender will loan funds to a dentist who has an overwhelming debt on one practice, and wants MORE funds to start ANOTHER practice. The only option for the dental tenant is to work for another dental practice, decreasing the standard of living, etc. Bankruptcy could become a reality; but, with a good part of a dentist’s income-producing age being stolen due to the financial horror and ensuing credit blemish; many times that’s becomes the end result.  

That’s why SNDA Agreements make a world of difference in securing a practice owner’s financial future.   

Never sign a lease without a detailed lease analysis and an SNDA Agreement signed by all parties (tenant, landlord, lender), and make sure it becomes a part of the final lease. Surprises can become expensive and devastating.