Non Disturbance Agreement Template for Indonesia
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What is a Non Disturbance Agreement?
The Non-Disturbance Agreement serves as a crucial document in Indonesian commercial real estate transactions where property is used as collateral for financing. It becomes particularly relevant when a landlord obtains or has obtained financing secured by the property that is or will be leased to tenants. The agreement ensures that if the landlord defaults on their loan and the lender forecloses, the tenant's lease rights will be preserved, providing security for their continued occupancy. Under Indonesian law, this document must comply with the Civil Code (KUHPerdata) and property regulations, requiring proper notarization and potentially registration with relevant authorities. The agreement typically includes detailed provisions about the property, lease terms, and lender's rights, while establishing clear procedures for notice and enforcement under Indonesian jurisdiction.
About the Non Disturbance Agreement
A Non Disturbance Agreement is a crucial legal document that protects your rights as a tenant when your landlord uses the property as collateral for financing. Under Indonesian law, this three-party agreement between you, your landlord, and the lender ensures your lease remains valid even if your landlord defaults on their loan and the lender forecloses on the property.
When do you need this document?
You need a Non Disturbance Agreement when leasing commercial or residential property where the landlord has secured or plans to secure financing using the property as collateral. This situation commonly arises in office buildings, retail spaces, warehouses, and residential complexes where landlords require substantial loans for property acquisition, development, or refinancing. The agreement becomes essential before signing your lease or when your landlord notifies you of upcoming financing arrangements. Without this protection, foreclosure could terminate your lease regardless of your compliance with lease terms, leaving you without legal recourse for relocation costs or business disruption.
Key legal considerations
The agreement must clearly define the property boundaries, lease terms, and each party's obligations under Indonesian contract law. Critical provisions include the lender's covenant not to disturb your peaceful enjoyment, procedures for rent payment during foreclosure proceedings, and your right to cure landlord defaults in certain circumstances. You should ensure the agreement specifies that your lease survives foreclosure with identical terms and conditions. The document must also address subordination clauses, where your lease rights may be subject to the lender's security interest, while maintaining your occupancy protection. Pay attention to notice requirements, default procedures, and any limitations on lease modifications that could affect your business operations.
Legal requirements in Indonesia
Under Indonesian law, Non Disturbance Agreements must comply with the Civil Code (KUHPerdata), particularly Book III on Obligations, which governs contract formation and enforcement. The agreement requires notarization by a licensed Notary Public (Notaris) to ensure legal validity and enforceability. Depending on the property type and lease duration, you may need to register the document with the local Land Office (Kantor Pertanahan) under Law No. 5 of 1960 on Basic Agrarian Law. For properties involving foreign investment, additional compliance with Law No. 25 of 2007 on Investment may be required. The agreement must be executed in Indonesian language or accompanied by certified translations, and all parties must have proper legal authority to enter the contract under Law No. 40 of 2007 on Limited Liability Companies if corporate entities are involved.
GOVERNING LAW
Applicable law
This Non Disturbance Agreement is drafted to comply with Indonesia law. Key legislation includes:
Law No. 5 of 1960 on Basic Agrarian Law: Regulates land rights and real property matters in Indonesia, crucial for understanding the property aspects involved in non-disturbance agreements
Law No. 25 of 2007 on Investment: Governs investment activities in Indonesia, relevant for understanding the framework of business relationships and foreign investment protections
Law No. 40 of 2007 on Limited Liability Companies: Regulates corporate entities and their authority to enter into agreements, including their rights and obligations in commercial relationships
Law No. 7 of 1992 on Banking (as amended): Relevant for understanding the banking aspects of NDAs, particularly when involving financial institutions and secured transactions
Government Regulation No. 24 of 1997 on Land Registration: Provides framework for registration of land rights and encumbrances, important for understanding property rights hierarchy and enforcement
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution: Important for dispute resolution provisions in NDAs, providing framework for handling disagreements between parties
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