Attornment And Non Disturbance Agreement Template for Indonesia

When you're involved in a commercial real estate transaction in Indonesia where a property serves as both collateral for financing and rental accommodation for tenants, you need an Attornment And Non Disturbance Agreement. This tri-party contract creates a delicate balance between the competing interests of landlords seeking financing, lenders requiring security, and tenants needing occupancy protection.

When do you need this document?

You'll require this agreement whenever a landlord obtains a mortgage or other secured financing against a property that has existing tenants or will be leased in the future. It's essential in shopping center acquisitions where anchor tenants need assurance their leases will survive ownership changes. The document becomes critical during refinancing transactions where new lenders demand priority over existing lease arrangements. You'll also need it in mixed-use developments where residential or commercial tenants occupy portions of mortgaged properties, and in sale-leaseback transactions where the original owner becomes a tenant while the buyer uses the property as loan collateral.

Key legal considerations

The agreement must clearly define each party's rights and obligations to prevent conflicts during enforcement. Your attornment clause should specify exactly when and how tenants must recognize the lender as their new landlord, typically triggered by foreclosure or deed-in-lieu proceedings. The non-disturbance provision must guarantee tenants can continue occupying the premises under their original lease terms, provided they're not in default. You need careful subordination language that establishes the lender's priority claim while preserving essential tenant protections. Consider including estoppel certificates requiring tenants to confirm lease terms and payment status. Address rent payment redirection procedures and ensure the agreement covers both current and future leases. Include specific performance remedies since monetary damages may be inadequate for breaches affecting property rights.

Legal requirements in Indonesia

Under Indonesian law, your agreement must comply with the Civil Code's contract formation requirements, including lawful cause, capable parties, and clear consent. The Basic Agrarian Law No. 5 of 1960 governs underlying property rights and may require specific documentation of land ownership status. Law No. 4 of 1996 on Security Rights Over Land (Hak Tanggungan) establishes the framework for mortgage priority and enforcement procedures that your agreement must acknowledge. Government Regulation No. 24 of 1997 mandates proper registration procedures for documenting property interests. Most agreements require notarization by an Indonesian notary public and registration with the local land office (Badan Pertanahan Nasional) to achieve full legal effect. Consider whether Law No. 42 of 1999 on Fiduciary Security applies to any personal property components. Ensure compliance with foreign investment restrictions if international parties are involved, and verify that all parties have proper legal standing under Indonesian corporate law.