The world of tenant/landlord and lease agreements is a complex one. While everyone’s case is different, understanding the basics of your agreement, as well as your options, can be a starting point for navigating these tricky waters.
In Session #4 of the Rapid Recovery Series: Navigating Landlord and Tenant Agreements, our experts took a look at why landlords aren’t participating in the CECRA program, definitions, and explanations that operators should note, as well as tenant options for lease defaults.
Our panel of experts included: Irving Fox, Alan Spergel, and Lawrence Gold.
As with our previous three other articles in this series, a cheat sheet of takeaways from this session can be found below but a recording of the session, along with the presentation deck is available here. You can find links for all other session downloads here.
Why aren’t landlords applying for CECRA?
- Complex application
- Exposure to audit
- Strict stipulated use of funds
- No rush; retroactive application is allowed
- Documentation required to support loss
- Possible drawback if fraud known to landlord
The term “commercial evictions” has been used very often in the media, but what does this really mean? Landlords will take either of two paths:
Right of distraint: seize assets, sell assets after appraisal however, the lease remains active
Right of termination: your locks are changed, you need to leave and remove belongings
But it’s important to note that this doesn’t mean game over!
Plan ahead – educate yourself on rights/obligations and options. Negotiate, negotiate, negotiate!
Landlord/tenant relationship is governed by:
- Language contained in lease agreement
- In Ontario, Commercial Tenancies Act R.S.O. 1990, c.
- L.7 (the “Act”)
- Case law
There are two ways to default: monetary (not paying rent) & non-monetary (improper use of premises).
Four remedies for landlord upon tenant default:
1. Affirm the Lease and periodically sue for rent as it becomes due for balance of term
2. Lease continues and landlord takes possession and re-lets premises on tenant’s account
3. Terminate Lease; sue for arrears of rent until termination
4. Terminate Lease; sue for damages until end of term
• Additional remedy of distress (same as distraint) available where Lease is not terminated
What can tenants do?
• Apply to court for relief from re-entry or termination
• Examine force majeure clause
• Dispute resolution provisions
• Limitation or notice periods
• Insist on landlord following proper procedure
• Apply to court where illegal distraint
• Negotiate rent waiver or deferral
• Understand your leverage
COVID-19 I.C.U. for Business
- First: you need to find out what you can afford to pay
- Have you had a good working relationship in the past with you landlord? Whether or not you can survive affects your landlord; you need to work together
- Construct a forecast for the next 6 months, and the next 6 months after
- Freeze all existing accounts payable as possible
- If you have a positive cash flow (without paying past debts), opt to negotiate with the landlord first. If this is not an option, then you can go forward with a Notice of Intention/Proposal
- Those with a negative cash flow (without paying past debts) should examine the possibility of bankruptcy to remove yourself from a bad situation in order to regroup and fight another day.