Can't Afford To Pay Rent During the COVID Crisis? - Not All Is Lost For Tenant Businesses

www.aaronmilleryourlawyer.com  **This blog post does not represent legal advice and is solely the opinion of the author. All contents of this blog and blog post are the exclusive property of Aaron Miller, Barrister & Solicitor


In the morning, while working on a case, I was shown an article from yesterday's Toronto Star. The article was about a large Downtown Toronto property development company, who after investing and borrowing countless amounts of funds into their three major building projects, have been forced into receivership by their creditors. A major reason for the receivership, according to the property development company, has to do with the COVID-19 crisis. In other words, for this property development company, as is no doubt the case for others, there has been extreme difficulty with getting cash/fund availability.

This got me thinking: if major property development companies are struggling to get funds to pay their creditors, what about small-to-medium size Ontario businesses who could potentially be struggling to pay their landlords?

Obviously, not all small-to-medium size businesses are struggling to pay their landlords. Some (the seemingly lucky ones) might even own their office space outright as landlords. However, for the many businesses that pay rent as commercial tenants, the COVID-19 crisis likely represents another uncertainty in uncertain times.

This being said, there is one thing that commercial business tenants should know: not all is lost here.

Under Ontario law, the following remedies are typically available to landlords when it comes to non-payment by tenants. (1) The landlord can affirm the lease ("keep the lease alive") and sue for rent; (2) The landlord can affirm the lease and re-enter and re-let the leased premises; (3) The landlord can affirm the lease and exercise rent distress (seizure of property); (4) The landlord can accept the repudiation of the lease, terminate the lease, and re-enter. A landmark case, Highway Properties v Kelly Douglas, [1971] S.C.R. 562, further documents these four landlord remedies in more or less the same effect.

Basically, when it comes to Ontario landlords enforcing their right to get paid on a lease, there are certainly ways for this to happen. However, given the uncertain times of today, the actual chances of commercial landlords successfully either repudiating and/or suing to enforce rent payment, is slim to nothing.

In Ontario, commercial landlord-tenant disputes fall under the regulation of the Commercial Tenancies Act (ONCTA). This differs from residential landlord-tenant disputes, which are regulated by the Ontario Landlord Tenant Act (LTA). Although Section 18 of the ONCTA allows landlords to repossess leased premises after 15 days of non-payment by the tenant (or failure to remedy in the interim), the chances of this actually happening during COVID-19 times are unlikely. I say this because, typically, repossession rights by the landlord are usually accompanied by a court order.

Considering the courts of Ontario are already backlogged and virtually non-existent due to the March 17, 2020 announcements of the Ontario Superior Court of Justice (operations are suspended; only "urgent matters" will be heard), this will pose a problem for commercial landlords wanting to enforce their rent payments. In Ontario, cases that fall under the ONCTA are usually required to be heard in the Ontario Superior Court. Therefore, this would seem to directly impact commercial landlord-tenant disputes.

Furthermore, even if a commercial landlord were to get writ a of possession from the court, the writ still needs to be executed by the Sheriff's Department. This is problematic, because as of now, the Sheriff's Department has been instructed not to carry out any more such orders. Ultimately, in spite of the realities of the law in times like these, it would still go a long way for commercial tenants to honour their lease contracts. Good landlord-tenant relationships are important, and can certainly go a long way. However, for small-to-medium size businesses that are truly struggling during the COVID-19 crisis, all might not be lost.


Aaron Miller is a Toronto-based, licensed Ontario lawyer, who is the proud Owner of Aaron Miller, Barrister & Solicitor, as well as Legal Counsel for Executive Furniture Rentals. For small-to-medium sized business owners, or commercial landlords that wish to reach out to Aaron Miller, he can be reached at 416-659-6665, or aaron@aaronmilleryourlawyer.com.   





 

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