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Nondisturbance Clause

By on July 11, 2019

A nondisturbance clause is a term found in a mortgage contract in which the lender agrees to allow an existing lease to continue without interruption should the property face foreclosure.

This can be an important clause for investment property whereby it’s primary purpose is to generate an income for the owner.

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Should a foreclosure proceed and a new owner of the property is established, the property would essentially have inherited tenants as they have been allowed to continue with their lease.

Under normal circumstances with the absence of a nondisturbance clause, an existing tenant can have the lease legitimately terminated resulting in a requirement to vacate the premises.

There are pros and cons from the perspective of the mortgagee whether to allow the insertion of such clauses in their loan contracts.

In other areas, nondisturbance clauses can also be found in the sale of land where there is a special agreement between both parties that the new owner agrees not to disturb the surface or interfere with developments on the land.

This is usually due to the seller wanting to retain the mineral rights.



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