Is the Churchs Chicken Sublease superior to the interests of the mortgagee?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
ny persons by reason of injury to persons or damage to property occasioned by any use, occupancy, condition, occurrence, happening, act, omission, or negligence referred to in the preceding sentence. The provisions of this Section shall survive the expiration or sooner termination of this Sublease with respect to any claims or liability occurring prior to such expiration or termination and shall not be limited by reason of any insurance carried by Sublessor and Sublessee. In any event, Sublessor shall not be liable for and Sublessee shall indemnify and hold Sublessor harmless from any loss, cost, damage, expense, or liability arising from Sublessee's or Sublessee agent's, contractor's, employee's or invitee's entry upon the Premises, whether before or after the Commencement Date; other than damages proximately caused by reason of the gross negligence or willful misconduct of Sublessor or its agents and employees. If any action or proceeding is brought against Sublessor by reason of any of the foregoing matters, Sublessee shall upon notice defend the same at Sublessee's expense by counsel reasonably satisfactory to Sublessor and Sublessor shall cooperate with Sublessee in such defense. Sublessor need not have first paid any such claim in order to be defended or indemnified.
(b) Indemnification of Sublessee. Sublessor shall indemnify, defend and protect Sublessee, its agents and employees and hold Sublessee, its agents and employees harmless from any and all loss, cost, damage, expense, liability (including, without limitation, court costs and reasonable attorney's fees actually incurred on an hourly basis and not as a mere percentage of the amount claimed) actually incurred in connection with or arising at any time from the gross negligence or willful misconduct of Sublessor or its agents and employees and any loss, cost, etc. arising during the completion of the improvements contemplated hereunder by Sublessor, except to the extent that such loss, cost, etc. arises from the negligence or willful misconduct of Sublessee or its agents' or employees' entrance upon or use of the Premises.
21. Subordination, Attornment, Non-Disturbance, and Estoppel Certificate.
- (a) Subject to the provisions of this Section, this Sublease shall be subject and subordinate to any and all Institutional Mortgages that may now or hereafter affect Sublessor's interest in the real property of which the Premises form a part, and of all renewals, modifications, consolidations, replacements, and extensions thereof. This clause shall be self-operative and no further instruments of subordination shall be required. In confirmation of this subordination Sublessee shall execute, within 10 business days after request to do so from Sublessor, any certificate that Sublessor may reasonably request:
- (i) making this Sublease superior or subordinate to the interests of the mortgagee;
- (ii) agreeing to attorn to the mortgagee or any successor Sublessor;
Source: Item 23 — RECEIPT (FDD pages 68–406)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, the Sublease agreement is generally subordinate to any existing or future Institutional Mortgages affecting the sublessor's interest in the property. However, there is a provision that allows the Sublessee (the franchisee) to request that the Sublease be superior to the interests of the mortgagee. This requires the Sublessee to execute a certificate to that effect within 10 business days of the request from the Sublessor.
This subordination clause means that if the sublessor defaults on their mortgage, the mortgagee (lender) could potentially foreclose on the property, which could affect the franchisee's sublease. However, the franchisee's obligation to subordinate its interests is conditional. The mortgagee must agree not to disturb the franchisee's possession and quiet enjoyment of the premises, provided the franchisee complies with the terms of the Sublease. This provides some protection for the franchisee, ensuring they can continue operating their Churchs Chicken restaurant as long as they meet their obligations under the sublease agreement.
Furthermore, the Sublessee is required to provide notice to the mortgagee of any default by the Sublessor and allow the mortgagee a reasonable opportunity (at least 30 days) to cure the default. The Sublessee must also agree to accept such cure if it is effected by the mortgagee. This arrangement gives the mortgagee an opportunity to protect their investment and potentially prevent a foreclosure, which could disrupt the franchisee's business. The Sublessee must also agree to allow the mortgagee to become the substitute Sublessor if they acquire the Sublessor's interest in the premises, but only with liability for obligations accruing after the interest is acquired, although the new owner is still obligated to remedy any pre-existing conditions of the building or premises.
In addition, the Churchs Chicken franchisee must execute estoppel certificates within 10 business days of a request, confirming factual matters about the Sublease. These certificates can cover items such as the occupancy date, expiration date, rent amount and payment status, any defenses or offsets, any defaults by the Sublessor, and whether the Sublease is in full force and effect. This requirement ensures transparency and provides the mortgagee with accurate information about the Sublease agreement. The franchisee must also attach copies of any modifications or amendments to the Sublease to the estoppel certificate.