Courts Order Commercial Tenants to Pay Rent Despite COVID-19
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We have previously written about a Quebec decision in which the court excused a commercial tenant from paying rent during the closure of its business due to the COVID-19 pandemic.

In that case, the court concluded that superior force caused by the COVID-19 pandemic had prevented the landlord from fulfilling its part of the lease, thus relieving the tenant from paying rent and the court ordered a reduction of rent in the amount of $26,950.

Ontario Court Rejects Tenant’s Claims

In a more recent Ontario case, the court came to a different conclusion.

In that case, the commercial tenant had closed its business from March 18, 2020 to May 25, 2020, due to public health mandated closures related to COVID-19 in Ontario. It later opened with limited operations and only resumed full operations in August 2020. 

At trial, among other issues, the tenant asked the court to relieve it of its obligation to pay rent during the shutdown period and pay a prorated amount of rent during the period of limited operations. The tenant based its claim on frustration and force majeure, arguing that the lease had been frustrated during the shutdown and was a force majeure.The tenant further submitted that the lease contained a force majeure clause and it should correspondingly be relieved of its obligation to pay rent.

The landlord disputed the tenant’s claim.

The court found that the force majeure clause in the lease did not relieve the tenant from the obligation to pay rent, stating:

“The obligation of the Landlord to provide quiet enjoyment is always subject to the payment of rent by the Tenant, as stated [in] the Lease. As [the tenant] did not pay rent during the subject periods, the Landlord’s obligation to provide quiet enjoyment correspondingly did not arise. […]

Government legislation enacted during the shutdown and the [limited operation period] to ensure the survival of small businesses focused on preventing eviction by landlords but did not suspend the payment of rent.”

As a result, the court rejected the tenant’s claim and ordered it to pay the rent.

Quebec Court Rejects HBC’s Claims

Similarly, in a Quebec decision this week, the court also rejected a commercial tenant’s claim that it should not have to pay rent due to the COVID-19 pandemic.

In that case, Hudson’s Bay Co. (“HBC”) was ordered to pay rent at six malls in Quebec after the company had ceased to pay rent in April. The landlords for the mall locations had gone to court to obtain safeguard orders to force HBC to pay rent. 

HBC had stated that it believed that the burden posed by the pandemic should be shared fairly by both landlords and retailers.

However, the interim safeguard orders did not decide whether the pandemic restrictions could be cited as a legal disturbance to justify not paying rent, so the issue will still need to be decided in court at a later date. Rather, the orders are intended to force HBC to keep paying as an emergency measure until the fundamental issue is settled.

The six safeguard orders require HBC to pay 100 per cent of the rent for a period of up to six months, starting in the month in which the landlords’ petitioned the court for help.

As a result, HBC must now pay upwards of $1.8 million in unpaid rent for the properties.

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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.

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