Friday, April 30, 2010

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Sunday, April 25, 2010

The role of the SNDA in Cell Tower Leases

At Cell Tower Attorney, we represent landowners exclusively. Our work is primarily focused on the negotiation of new cell tower leases, lease buyout agreements, and cell tower lease amendments. In connection with these transactions, the carrier, tower company or lease buyout company may include a clause requiring the landowner to obtain a Subordination, Non-Disturbance Agreement or “SNDA” from its lender on the property. We are frequently asked by our clients to explain what a SNDA is and what purpose it serves. Simply put, an SNDA is an agreement that is entered into by the bank or lender of the landowner in which the lender agrees to honor the cell tower lease or buyout agreement in the event of a foreclosure on the property. Without such an agreement, the cell tower lease or buyout agreement is at risk of being extinguished in the event of a foreclosure because the bank’s interest in the property is always superior to the cell phone or buyout company’s interest.

Given the economic downturn of the last two years, the foreclosure rate in many states is at an all-time high. Because of the heightened risk of foreclosure, many banks are non-responsive when approached with a request for a SNDA or unwilling to execute such a document which can make it frustrating for landowners and cell phone companies alike. In fact, when we negotiate lease language, we only agree to include language that requires our clients to use “commercially reasonable efforts” to obtain a SNDA because we cannot guarantee that the lender will be cooperative with such a request. For some cell phone tenants this language is sufficient, however, others are insistent upon the landowner obtaining the SNDA prior to executing the lease. This can lead to extensive delays in finalizing a lease or buyout agreement and in extreme cases, result in losing the lease or agreement entirely. If you are a landowner who is approached by a cell phone carrier, tower company or lease buyout company, you should familiarize yourself with the SNDA issue before moving ahead with the transaction or unnecessarily spending money on an attorney to review the proposed lease or buyout agreement.