A Nondisturbance clause ensures that a tenant's rights and occupancy under a lease will not be disturbed by foreclosure or other disturbances caused by a lender or superior interest holder. It provides tenants with protection, allowing them to continue operating their business uninterrupted, even if the property owner defaults on their loan obligations.
SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT AGREEMENT This SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT AGREEMENT (this “Agreement”) is entered into as of November 2, 2020 (the “Effective Date”), between U.S. BANK NATIONAL ASSOCIATION, a national banking association, whose address is 4100 Newport Place, Suite 900, Newport Beach, California 92660, Attention: Commercial Real Estate Banking, in its capacity as administrative agent (“Administrative Agent”) for the lenders (each, a “Lender” and, collectively, the “Lender”), and ACCENTURE LLP, an Illinois limited liability partnership (as successor-in-interest to Acquity Group, L.L.C., a Delaware limited liability company), whose address is 161 North Clark Street, Chicago, Illinois 60601, Attention: Real Estate Director (“Tenant”), with reference to the following facts:
Nondisturbance and Attornment. If the Lease has not been terminated on account of an Event of Default by Tenant, then, when Successor Landlord takes title to Landlord’s Premises: (a) Successor Landlord shall not terminate or disturb Tenant’s possession of Tenant’s Premises under the Lease, except in accordance with the terms of the Lease and this Agreement; (b) Successor Landlord shall be bound to Tenant under all the terms and conditions of the Lease (except as provided in this Agreement); (c) Tenant shall recognize and attorn to Successor Landlord as Tenant’s direct landlord under the Lease as affected by this Agreement; and (d) the Lease shall continue in full force and effect as a direct lease, in accordance with its terms (except as provided in this Agreement), between Successor Landlord and Tenant.
Nondisturbance. If there is a judicial foreclosure sale, a sale pursuant to the power of sale, or an acceptance of a deed in lieu of foreclosure under the Mortgage (any such event being a “Foreclosure Transfer”), the Lease shall not be terminated (or subject to termination) as a result of the Foreclosure Transfer, nor shall Tenant’s use, possession or enjoyment of the portion of the Property demised by the Lease be disturbed, so long as no default exists and no other event has occurred under the Lease that would give the landlord under the Lease the right to terminate the Lease or would cause automatic termination of the Lease. Tenant agrees that the person or entity, which may include Lender, and its successors and assigns, that acquires title to the Property by reason of a Foreclosure Transfer and succeeds to the interest of Borrower as landlord under the Lease (such person or entity being the “Foreclosure Transferee”) shall not be: (a) liable for any act or omission of Borrower or any other prior landlord under the Lease, (b) subject to any claim, charge, offset or defense under the Lease that Tenant might have against Borrower or any such prior landlord based on any act, omission, event or occurrence before the Foreclosure Transfer, (c) bound by any rent, additional rent or deposit that Tenant might have paid in advance to Borrower or any such prior landlord for more than the current month (or other period for which rent or additional rent is to be paid in advance in accordance with the Lease) in which the Foreclosure Transfer occurs, unless such rent, additional rent or deposit is actually received by the Foreclosure Transferee, (d) bound by any amendment or modification of the Lease or any termination of the Lease made without Lender’s prior written consent, (e) responsible for repairing or restoring the Property in the case of damage by fire or other casualty or taking by condemnation, (f) obligated to perform any construction work required to be done by Borrower or any such prior landlord or to reimburse Tenant for any construction work performed by Tenant, or (g) bound by any agreement not expressly set forth in the Lease.
In confirmation of such subordination, Tenant shall execute and deliver any reasonable instrument that Landlord, the Lessor of any such Superior Lease, the holder of any Mortgage or any of its successors in interest shall reasonably request to evidence such subordination, provided that such instrument includes a Nondisturbance Agreement or a separate Nondisturbance Agreement with respect to the applicable Mortgage or Superior Lease has been delivered to Tenant. The leases to which this Lease is, at the time referred to, subject and subordinate pursuant to this Article 13 are herein called “Superior Leases”, the mortgages to which this Lease is, at the time referred to, subject and subordinate are herein called “Mortgages”, the lessor of a Superior Lease or its successor in interest at the time referred to is herein called a “Lessor” and the mortgagee under a Mortgage or its successor in interest at the time referred to is herein called a “Mortgagee”.
As long as (i) the term of the Lease shall have commenced pursuant to the provisions thereof, (ii) Tenant shall be in possession of the Leased Premises, (iii) the Lease shall be in full force and effect, and (iv) Tenant is in compliance with the terms of this Agreement and no default exists under the Lease beyond applicable cure periods, nor has any event occurred that with the giving of notice or the passage of time or both would entitle Landlord to terminate the Lease or would cause, without any further action by Landlord, the termination of the Lease or would entitle Landlord to dispossess Tenant under the Lease (conditions “i” through “iv,” collectively, the “Nondisturbance Conditions”), Mortgagee shall not name Tenant as a party defendant in any action for foreclosure of the Mortgage or other enforcement thereof (unless required by law), nor shall the Lease be terminated by Mortgagee in connection with or by reason of foreclosure or other proceedings for the enforcement of the Mortgage or by reason of a transfer of Landlord’s interest, if any, in the Mortgaged Premises or under the Lease pursuant to a conveyance in lieu of foreclosure (or similar device) (any of the foregoing, a “Foreclosure”). nor shall Tenant’s use or possession of the Leased Premises be interfered with by Mortgagee, unless Landlord would have had such right.
The term “Nondisturbance Agreement” shall mean, subject to Section 13.2 hereof, an agreement, in recordable form, between a Lessor or a Mortgagee, as the case may be, and Tenant, to the effect that (i) if there is a foreclosure of the Mortgage, then the successor to Landlord by virtue of the foreclosure will not evict Tenant, disturb Tenant’s possession under this Lease, or terminate or disturb Tenant’s leasehold estate or rights hereunder, and will recognize Tenant as the direct tenant of such successor to Landlord on the same terms and conditions as are contained in this Lease, or (ii) if the Superior Lease terminates, then the Lessor will not evict Tenant, disturb Tenant’s possession under the Lease, or terminate or disturb Tenant’s leasehold estate or rights hereunder, and will recognize Tenant as the direct tenant of such Lessor on the same terms and conditions as are contained in this Lease.
Terms of Nondisturbance Agreements. Subject to the terms of this Section 13.2, any Nondisturbance Agreement may provide that the Person that succeeds to Landlord by reason of the foreclosure of a Mortgage or by reason of the termination of a Superior Lease, as the case may be (any such Person being referred to herein as the “Successor”) shall not be: (A) liable for any act or omission of any prior landlord (including, without limitation, the then defaulting landlord), except to the extent that (i) such act or omission continues after the date that the Successor succeeds to Landlord’s interest in the Real Property, and (ii) such act or omission of such prior landlord is of a nature that the Successor can cure by performing a service or making a repair, (B) subject to any defenses or offsets that Tenant has against any prior landlord (including, without limitation, the then defaulting landlord), except that the Successor shall be subject to any offsets that are expressly permitted under this Lease, (C) bound by any payment of Rental that Tenant has made to any prior landlord (including, without limitation, the then defaulting landlord) more than thirty (30) days in advance of the date that such payment is due (other than the Rental that Tenant pays in advance pursuant to Article 2 hereof) (except to the extent that the Successor actually receives payment thereof), (D) bound by any obligation to make any payment to or on behalf of Tenant to the extent that such obligation accrues prior to the date that the Successor succeeds to Landlord’s interest in the Real Property,
Nondisturbance is a contractual provision or agreement that aims to protect a tenant’s rights in the event that the property they occupy is sold, foreclosed upon, or otherwise transferred. It ensures that the tenant can continue to occupy the leased premises under the same terms, despite such changes in ownership or control of the property. This clause is particularly crucial in commercial leases to provide stability and security for tenants.
A Nondisturbance agreement should be considered in the following scenarios:
A carefully crafted Nondisturbance clause should include the following elements:
Example: “In consideration of the Lease and for other good and valuable consideration, the undersigned lender hereby agrees that if it should succeed to the interest of landlord by reason of foreclosure, deed in lieu of foreclosure, or otherwise, it shall not terminate or disturb Tenant’s leasehold estate or rights under the Lease, provided that Tenant is not in default under the Lease.”
Nondisturbance clauses or agreements are most commonly found in:
By including a nondisturbance provision or separate agreement, all parties involved can better protect their interests, ensuring tenant stability despite changes in property ownership or financial circumstances.
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