A lease providing
itself to be subordinate to any encumbrances shall be terminated upon any foreclosure.  A lease can be subordinate by either being later in time or by contract.  Lessee interests are particularly important if the lessee is a commercial business.
-    Leases prior to a mortgage are superior in most states because a lessee in possession is ample notice of the tenant’s rights.  They cannot be extinguished by foreclosure of the mortgage.  In title and intermediate theory states, a mortgagee can demand payment of rent from a tenant since default of a mortgage conveys title, creating a “privity of estate” link.
-    Leases that are junior to a mortgage can be extinguished by foreclosure.  In some states, it MUST be extinguished by foreclosure.  There is no privity of estate between the mortgagee and the lessee, so mortgagee cannot compel the tenant to remain and pay rent to him.  If the mortgagee wishes to continue the lease, an assignment of rents is the preferable solution.
-    Commercial lease setting:
1.    Subordination agreement
2.    Nondisturbance agreement
3.    Attornment – if title is transferred, tenant still owes the purchaser rent and terms under the lease as if he were the original landlord.
-    If there are conflicting provisions in a lease and a mortgage, if the mortgage is senior to the lease, its provision trumps the lease counterpart provision.