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ARTICLE · 12 MAY 2008

Lender Non-Disturbance Agreements – Pitfalls And Traps

Blake, Cassels & Graydon LLP
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The interplay between leases and mortgages is well settled at common law.

CanadaReal Estate and Construction
Joseph Grignano
Joseph Grignano
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Copyright 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Real Estate Leasing, April, 2008

The interplay between leases and mortgages is well settled at common law. Thus, a tenant whose lease has priority over a mortgage is bound by the lease if the mortgagee (lender) enters into possession. At the same time, the mortgagee in possession must honour the lease and cannot oust the tenant. However, a tenant under a lease that is subordinate to a mortgage is not bound by its lease if the mortgagee enters into possession and, accordingly, the tenant may vacate the premises rather than recognize the mortgagee as its landlord. Correspondingly, where the lease is subordinate to the mortgage, the mortgagee is not bound to the lease and may remove the tenant.

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