A recent Ontario Superior Court decision confirmed that if a business owner has fallen behind on their mortgage, a tenant may run the risk of losing the protection offered by their lease and possibly facing eviction. A non-disruption clause is a provision of a mortgage contract that guarantees the durability of a lease between the tenant and the lessor in all circumstances. This is mainly done to protect the tenant from eviction by the mortgage debtor when the property is forcibly seized by the lender. A non-compliance clause ensures that a tenant is not evicted in the event of the landlord`s bankruptcy. This case shows the importance for tenants to obtain an exemption from disruption. A non-disruption agreement is an agreement between the lessee and the lessor`s lender, which allows the lessee to remain in possession of the leased premises, in accordance with the terms of the lease agreement, despite an action for cessation of action against the lessor. If, in this case, a no-disruption agreement had been reached, the outcome could have been very different. The court found that there was only one oral agreement between the tenant and the landlord when the landlord obtained the mortgage and the lease itself was entered into after the mortgage was obtained. Nor did the court find evidence that the original mortgage was aware of the verbal agreement between the lessor and the tenant or that he accepted the lease. The court therefore concluded that the lease of the first or second mortgage was not binding. While most commercial leases provide for the tenant to perform a “subordination, non-disruption and shutdown agreement” commonly referred to as an “SNDA”, it would be difficult for a majority of tenants who have signed such leases and most likely for many of the real estate agents who represented these tenants to explain the importance of an SNDA. and why they are needed by both commercial lenders and tenants.
Non-disruption is a contractual agreement of the lender not to disturb the tenant`s detention in the premises as part of the rental agreement in case of forced execution. Clearly, in any situation where the tenant agrees to subordinate the lease to the right to pledge the loan, a tenant should require a lender to have a non-disruption agreement. It is also recommended that tenants unilaterally apply for a non-disruption agreement from an existing lender when the tenant enters the lease agreement, as the lease would be automatically subordinated to the pledge of the loan, given that it is chronologically withdrawn from the pledge right. Lenders are generally willing not to grant disruption to a non-defaulting tenant in exchange for the contractual subordination of the lease agreement to the pledge of the loan. Commercial leases often include what is called a subordination, non-disruption, and separation agreement, commonly known as an SNDA. SNDAs explain certain rights of the tenant, the lessor and related third parties, such as. B from the lessor`s lender or a buyer of the property. An SNDA consists of three components: the subordination clause, the non-disturbance clause and the attornation clause. Overall, contracts using an SNDA in a commercial lease benefit both tenants and lessors. The non-disruption agreement refers to an agreement between a tenant and the lessor`s lender to ensure that the tenant remains in possession of the leased property despite a enforcement action against the landlord. . .