As a result of the COVID-19 pandemic, a March 19, 2020 Order of Chief Justice Morawetz suspended all residential evictions and/or writs of possession until further notice. However, commercial tenancies were not included in that Order and remain subject to normal rules.
However, in addition, Ontario courts have suspended the hearing of all matters unless they are deemed “urgent”. As a result, any commercial lease disputes must prove to be urgent to be heard by a court, as was the case in a recent Ontario decision, in which the landlord locked his tenant out of the premises in the midst of the COVID-19 pandemic.
The landlord owns a commercial building in Waterloo. The tenant had leased a portion of the building beginning in the 1990s. The parties entered into a written lease dated November 1, 2017. The lease was for a period of five years with an option in favour of the tenant to renew the lease for a further term of five years.
The lease was for the main floor and a room on the second floor of the leased premises. The tenant operated a licensed restaurant and bar on the main floor and the second floor room was used as an office and storage room.
The lease provided for payment of base rent in the amount of $1,400 per month. The lease also provided for additional rent covering utilities, maintenance costs and other operating costs. Finally, the lease provided that any bona fide offer to purchase the property would be subject to the terms of the lease.
In September, 2019 the landlord advised the tenant that he was interested in selling the property.
On October 28, 2019, the landlord delivered a handwritten note to the tenant purporting to unilaterally amend several of the terms of the lease including additional rent. The note stated that the tenant was in breach of a zoning bylaw as result of its use of the second floor room as an office. The note ended with an assertion that if the tenant did not immediately pay the additional rent the locks to the premises would be changed.
On January 29, 2020, the landlord wrote again to the tenant claiming numerous breaches of the lease and purporting to terminate the lease effective March 31, 2020. The reasons for terminating the lease included nonpayment of base rent, nonpayment of additional rent, and breach of the Planning Act in relation to the use of the second floor room. On February 14, 2020 counsel for the tenant wrote to the respondent asserting that the applicant had not breached any of the provisions of the lease.
The tenant paid rent on April 1, 2020.
Howewever, on April 7, 2020, the landlord locked the tenant out of the leased premises and posted a Notice of Termination and Forfeiture of Lease on the front door of the building.
The tenant brought an application pursuant to the Commercial Tenancies Act for various types of relief including that he be allowed immediate access to the leased premises and that the landlord be restrained from entry or re-entry to the leased premises.
A triage judge determined the matter was urgent and it was heard by video conference.
The court began by explaining that the test for granting an interlocutory injunction is as follows:
1) The applicant must show that there a serious issue to be tried;
2) The applicant must show that it will suffer irreparable harm if the injunction is not granted; and
3) There must be an assessment regarding which of the parties would suffer the greater harm by the granting or the refusal to grant the injunction.
The court found that the tenant had met each of the three parts of the test for the granting of an interlocutory injunction.
The court found that the landlord’s allegations about the tenant being in breach of the terms of the lease were vague and unsupported by written evidence. In fact, it found that the landlord’s complaints only surfaced after he decided he wanted to sell the property without burdening the new owner with the tenant’s lease. The court found that the tenant had not breached any terms of the lease.
Further, the court found that the tenant would suffer irreparable harm if the injunction was not granted, stating:
“The action of the [landlord] in locking the [tenant] out of the premises effectively puts an end to the business. The [tenant] will likely suffer a loss of goodwill if it is not allowed to continue in business. […]
[I]f the injunction is refused, the [tenant] will be put out of business. Conversely, if the injunction is granted, the [landlord] will receive exactly what he contracted for when he signed the lease dated November 1, 2017.”
As a result, the court ordered an interlocutory injunction granting the tenant the right to re-enter the property and prohibiting the landlord from re-entering the premises and from interfering with the tenant’s use and enjoyment of the property.
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At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.