Non Disturbance Agreement Template for Australia

When you're involved in a commercial property lease where the property is mortgaged, a Non Disturbance Agreement protects your interests as a tenant, landlord, or lender. This three-party contract ensures that tenant rights survive potential landlord defaults while enabling property owners to obtain necessary financing. Understanding this agreement is crucial for navigating Australian commercial property transactions successfully.

When do you need this document?

You need a Non Disturbance Agreement when entering into or renewing a commercial lease on mortgaged property. This situation commonly arises when landlords seek new financing or refinancing for properties with existing tenants, or when new tenants are moving into already-mortgaged premises. The agreement becomes essential during property acquisitions where the buyer plans to mortgage the property while honoring existing leases. Shopping centers, office buildings, and industrial properties frequently require these agreements to balance tenant security with lender protection. Without this agreement, tenants risk eviction if the landlord defaults, while lenders may struggle to realize their security interests effectively.

Key legal considerations

The core provision is the non-disturbance covenant, where the lender agrees not to terminate the tenant's lease upon landlord default or foreclosure, provided the tenant remains compliant with lease terms. You must carefully define each party's obligations, particularly the tenant's duty to recognize the lender as the new landlord if foreclosure occurs. The agreement should specify which lease provisions survive foreclosure and establish clear procedures for notice, payment, and communication between parties. Consider including subordination clauses that clarify the priority of interests, and attornment provisions requiring the tenant to accept the lender or new owner as landlord. Review indemnification clauses that may hold tenants liable for certain costs, and ensure modification procedures protect all parties if lease terms change.

Legal requirements in Australia

Under the Real Property Act 1900 and equivalent state legislation, Non Disturbance Agreements must comply with property registration requirements and statutory disclosure obligations. The Corporations Act 2001 governs execution when corporate parties are involved, requiring proper authority and compliance with constitution requirements. You must ensure the agreement satisfies Australian contract law principles including offer, acceptance, consideration, and intention to create legal relations. The Personal Property Securities Act 2009 may apply if personal property security interests are involved alongside the real property arrangements. Competition and Consumer Act 2010 provisions about unfair contract terms may apply to standard form agreements, particularly affecting smaller business tenants. Each state's property legislation contains specific requirements for lease registration and mortgage priority that your agreement must address to ensure enforceability.