Under common law, if a tenant has notice of a lender’s prior security, the lender will not be bound by the tenant’s lease and, when enforcing its security, may terminate the lease and evict. How are tenants to protect themselves? Non-disturbance agreements can help. From a tenant’s perspective, non-disturbance agreements give the tenant security of tenure during the term so long as the tenant is not in default. From a lender’s perspective, non-disturbance agreements can ensure future rent in the event the lender goes into possession. Sound easy? There’s more. Non-disturbance agreements require careful consideration. Poorly drafted non-disturbance agreements where a lender simply agrees not to disturb a tenant’s possession of the premises will not necessarily require the lender to perform all the landlord’s obligations under the lease but only those obligations that “run with the land”. However, when a lender covenants to be bound by the terms and provisions of a lease, that lender, should it go into possession, will be required to assume all of the obligations of the landlord. As demonstrated in the TDL Group case, this small point can carry a heavy price tag.
This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.
Miller Thomson LLP uses your contact information to send you information electronically on legal topics, seminars, and firm events that may be of interest to you. If you have any questions about our information practices or obligations under Canada's anti-spam laws, please contact us at email@example.com.
© 2021 Miller Thomson LLP. This publication may be reproduced and distributed in its entirety provided no alterations are made to the form or content. Any other form of reproduction or distribution requires the prior written consent of Miller Thomson LLP which may be requested by contacting firstname.lastname@example.org.