Prime landlord's consent to sublease

he mortgagee should be concerned about, is getting mortgagee protections from the master landlord and sandwich leaseholder - the sublandlord.


from DIRT, September 25, 2006


"The Master Lease should typically control over any subsequent agreements.


The Landlord need not be interested in the terms of the mortgage, only the priority of his interests. If there is a default under the terms of the Master Lease, it is either cured or the Master Lease can be terminated. Who cures is not necessarily a concern. If there is a default under the Sublease, it is for the Lender and the Sublandlord to cure or see their interests terminated. The Landlord should not care who cures or how.


The Sublandlord is in the same situation as the Landlord vis-à-vis the Sublease and the Leasehold Mortgage. The Sublandlord does not care who cures the Subtenant's default (either the Subtenant or the Lender) so long as it is cured.


The Leasehold Mortgage covers whatever leasehold has been granted and should not control the term of any superior interests.


Now this scenario changes as the financial interests in the property change. If the Lender's loan is for significant improvements upon the property that have some benefit to the superior interests of the Landlord and/or Sublandlord, then some negotiation of terms and priorities may be appropriate where the viability of the Subtenant is of concern.


In addition, the sub-sub-lessee should be concerned about entering into an attornment and non-disturbance agreement (SNDA) with the sublessor and the master lessor covering the default of the sandwich leaseholder.
If the master lease or the sandwich lease terminate the sub-sub-lessee's position also evaporates since it is not in privity with the master lessor. But if the master lessor and sublessor agree not to disturb the sub-sub-lessee's tenancy and allow it to attorn, the problem is cured.

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