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Finding Your Way Around the Letter of Intent, the Letter of Credit, and the SNDA

OnDemand Webinar (90 minutes)

Gain an understanding of how to craft a letter of intent that facilitates the negotiation of the lease and the key terms that should be included.Gain a working understanding of what goes into properly documenting a letter of intent in lease transactions. You will learn about two agreements generally referred to in letters of intent, the bank letter of credit and the SNDA. Join experts Manuel Fishman and Margaret Duskin for a discussion on how landlords and tenants document these lease-related agreements and review how the pandemic has impacted the letter of intent process.


Margaret R. Duskin, LEED GA, Cushman & Wakefield of California, Inc.
Manuel Fishman, Esq., Buchalter Nemer



• What Ties These Three Documents Together?

• Contract Terms, Credit Support, and Priority

Letters of Intent

• Purpose and Timing

- Meeting of the Minds

- Allows a Tenant to Compare Deals Side by Side and Allows the Landlord to Begin Financial Modeling

- Provides Direction to Legal Counsel

- Sets Tone for Negotiations and Guides Business Teams on Unique or Non-Standard Terms

• Binding Versus Non-Binding

- Review Non-Binding Language and Importance of Maintaining Optionality

- Review Case Law and Lessons Learned From Bad Drafting

• Key Terms to Include in a Letter of Intent

- Name of Tenant, Rent, Term, Condition of Premises Upon Delivery and Build-out Obligations/Allowances, Pass-Through Charges - Net, Gross, Hybrid

- Letter of Credit, Guaranty, and SNDA

- Review Other Terms to Consider Including

- Retail, Industrial, and Other Unique Properties

• Lessons Learned From COVID-19

- Insurance Provision Updates/Increased Coverage

- Address Governmental Restrictions to Access

- Rent Abatement Structures - Create a Formula

- Delays in Delivery/Commencement Date Impact

• Broker Disclosures

- State Required Disclosures

- Dual Agency

- Disclosure That Brokers Are Not Experts in Various Areas Requiring Consultants

Letters of Credit

• What Is a Letter of Credit?

- An Irrevocable Contract That Is Strictly Construed Based on Its Written Terms and Governed by Certain Industry Developed Protocols and a Stated Jurisdiction's Laws

- Understanding the Terms: Applicant, Issuer, Beneficiary

- UPC 600 and ISP98, and Interaction With the UCC

- Selecting a Controlling Jurisdiction in the Event of Conflict

• What Does a Letter of Credit Say?

- Essential Terms

- Fixed Term and Evergreen Provisions

- What Is Required to Draw Upon a Letter of Credit?

• Advantages and Disadvantages of Using a Letter of Credit

- For Landlord - Bankruptcy Protection vs. Defective Presentation

- For Tenant - Preserve Use of Funds vs. Cost and Annual Compliance

- Qualifying the Issuing Bank

• Reductions and Renewals

- Pitfalls of Automatic Reductions

• Bank Charges for Transfers and Other Actions

Subordination Non-Disturbance and Attornment (SNDA)

• The Agreement Establishes the Legal Priority and Rights Between the Landlord's Lender and the Tenant If the Landlord Defaults Under the Stated Loan

• As the Name Applies, the Agreement Deals With Three Contractual Commitments: Subordination, Non-Disturbance, and Attornment

- Why Is Document Needed?

- Often, SNDA Also Includes Covenant of Tenant to Pay Rent to Lender Upon Notice of Landlords Default Under Loan

• Key Provisions for a Lender

- Lender - Non-Liability/Exculpation for Prior Landlord Default

- Lender Right to Insurance Proceeds and Condemnation Award

- Amendments to the Lease Without Lender's Consent (but See Below)

- Lender Cure Rights (but See Below)

• Key Provisions for a Tenant

- Amendments to the Lease Without Lender's Consent

- Lender Cure Rights (Setting an Outside Date)

- Assignment and Subletting Provisions of the Lease Control

- Conditioning Non-Disturbance on No Default Under the Lease

- Consider Improvement Allowances and Mid-Term Concessions

• Review Case Law

• Record or Not to Record

• Timing of Delivery and Lender Charges - What to Say in the Lease

• Relationship to Sublease Recognition Agreement