The financial instability being faced by both individuals and companies throughout the country due to the ramifications of COVID-19 is creating insecurity in a number of areas, including in residential and commercial leasing matters. Many tenants under financial strain are wondering about their obligation to continue to pay rent during this unprecedented time, while both residential and commercial landlords are unsure of their options if a tenant stops making payments under an existing lease.
In March, the province shut down most businesses in Ontario in order to limit person-to-person contact. In anticipation of the financial challenges this would cause for Ontarians who rent their homes, the government made the following announcement on March 19th:
As the COVID-19 situation continues to evolve, Tribunals Ontario is taking action to safeguard the health and well-being of all Ontarians, while continuing to ensure access to justice. The Landlord and Tenant Board (LTB) has reviewed the appropriate approach to conducting hearings and until further notice the LTB is suspending:
1) All hearings related to eviction applications, unless the matter relates to an urgent issue such as an illegal act or serious impairment of safety; and
2) The issuance of eviction orders, unless the matter relates to an urgent issue such as an illegal act or serious impairment of safety.
While evictions have been halted, there are no mandated regulations in place with respect to a temporary suspension of rent collection or payment obligations for tenants. For those who own homes and pay mortgage payments, most of the major Canadian banks have begun to offer mortgage payment deferrals for this period of time, but there are no similar widespread policies in place for those who pay rent.
The Ontario government has encouraged landlords and tenants to work together in situations where a tenant may have trouble paying rent, to find an arrangement that the parties can both agree to. Given these guidelines, the hope is that parties will come to terms themselves without intervention but the fact remains that many tenants may find themselves facing eviction proceedings once the LTB resumes regular function if they are unable to make up rent arrears at that time.
Commercial Tenancy Considerations
Businesses throughout Ontario have largely been forced to close or dramatically alter their operations in order to facilitate social distancing regulations. For many, this means income has either completely stopped or been severely curbed for an undefinable period of time. Even within the first couple of weeks after the closures, many businesses were forced to lay off staff and make other arrangements to reduce immediate expenses. For those businesses that lease their property, the current situation has placed a particular strain on those obligations, which generally make up one of a business’s most significant monthly expenses. While the government has encouraged commercial landlords to make arrangements with their tenants during this time, they are not required to do so.
Typically, a commercial landlord has a few options with respect to enforcement a lease if the tenant stops paying rent. The landlord can sue for payment of the rent owed, seize property from the tenant, or re-enter the property to force the tenant out if the lease allows for such a right or the landlord receives a court order to this effect. If a landlord wishes to terminate the lease in order to find a new tenant, they may do so pursuant to s. 18 of the Commercial Tenancies Act, however, landlords are generally advised to obtain a court order before taking this step. With a court order, a landlord can then have the Sheriff’s Department execute a writ of possession and remove the existing tenant from the premises.
However, along with other services, the Ontario government has chosen to close courts in the province to all but emergency matters for the time being, significantly restricting the matters a court will hear to urgent family and criminal matters. As a result, it will be difficult for a commercial landlord to obtain a court order granting the termination of a lease during this time.
For now, commercial landlords should try to work with clients to make mutually agreeable arrangments for the duration of the emergency order while planning for future enforcement of a lease’s terms, if necessary, once business in the province begins to return to normal.
At Baker & Company in Toronto, our real estate lawyers take the time to meet 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.