Why is my Landlord Asking me to Sign an Attornment Agreement?
Before you can understand why you are being asked by your landlord to sign an “attornment agreement,” you must understand what attornment agreement is. Black’s Law Dictionary defines the term “attornment” by reference to “feudal and old English law,” as “the act of a person who holds a leasehold interest in land, or estate for life or years, by which he agrees to become the tenant of a stranger who has acquired the fee in the land, or the remainder or reversion, or the right to the rent or services by which the tenant holds. It is an act by which a tenant acknowledges his obligation to a new landlord. ¶ The agreement of a person to recognize a third party as a permissible successor party to a contract; most often, the agreement of a tenant to pay rent to a new landlord, especially a mortgagee who has foreclosed.” Black’s Law Dictionary (5th Ed. West 1979), page 119.
In California, most often tenants are asked to sign an attornment agreement when their landlord is refinancing the real property on which the tenant’s premises are located and serves two purposes. First, the agreement generally contains one or more provisions dealing with a preservation of the tenant rights, even if the landlord defaults on its obligations to its lender. The second component relates to the tenant’s obligations under the lease and assures the lender that, even if the lender forecloses and replaces the landlord, the tenant will recognize the foreclosing lender as the new landlord and will continue with its obligations (such as paying rent and giving notices) to the new landlord.
Some provisions that a tenant can expect to see in an attornment agreement include, but are not limited to:
• In the event the lender succeeds to a current landlord, it will not be liable for any act or omission of the prior landlord undisclosed by the tenant
• The lender will not be liable for any defenses or offsets which the tenant may have against the current landlord
• The lender will not be liable for any modification of the lease occurring after the date of the attornment agreement without its prior written consent
• The lender will not be liable for the return of any security or other deposits made by the tenant to the current landlord
• A representation from the tenant that the tenant is the sole owner of the current leasehold estate
• A representation that the tenant will not seek to terminate the lease because of a breach by the current landlord without providing prior written notice to the lender
• A representation that the tenant will not pay sums due the current landlord more than 30 days in advance
To understand the laws, rules and regulations which will enable you to make informed decisions about your company, and how best to do business in California, you need the services of an attorney uniquely qualified to give you that advice. Michael Leonard, Esq. of San Diego Corporate Law, named “Best of the Bar” for 2016 by the San Diego Business Journal, is that attorney. To schedule a consultation with Mr. Leonard to discuss any business-related matter, you can contact him by visiting San Diego Corporate Law or by telephone at (858) 483-9200.