The moratorium on commercial evictions is looming heavy over many commercial landlords as they struggle with rent arrears and on going government shut downs. However, commercial landlords are afforded legal remedies that may provide solutions to these challenges.
As of January 31, 2021, Ontario Regulation 763/20, made under the Commercial Tenancies Act, R.S.O. 1990 c.L.7 (“Ontario Moratorium Regulation”), provides that there is effectively a moratorium on commercial evictions from December 2020 to potentially April 22, 2022, if the tenant meets certain conditions.
A commercial tenant is able to be protected by the moratorium if they satisfy the following criteria:
- the tenant has been approved to receive Canada Emergency Rent Subsidy (CERS);
- the tenant provided proof of the approval to the landlord; and
- no more than 12 weeks have passed since the day the tenant was approved
In the recent Ontario Superior Court of Justice case, Cherry Cola’s Rock N’ Rolla Inc. v Choi, Judge Chalmers provided some insight into the Ontario Moratorium Regulation and what it means for commercial landlords and tenants. It was decided by the Court that the Regulation does not prescribe a time period in which the commercial tenant must provide proof of approval to their landlord. The non-enforcement period is in effect so long as proof of approval is provided to the Landlord and no more than 12 weeks have passed since the day the Tenant was approved. Judge Chalmers stated that “the regulation does not state that the non-enforcement period applies only if the CERS funds are paid in full to the landlord. Although there is no requirement in the Regulation, there is an expectation that the tenant and landlord will work out an arrangement to pay the rent, or a portion thereof.”
The outcome of this matter may provide some insight on how commercial landlords may navigate the new CERS regulations. The court stated that there is no obligation on the part of the tenant to provide the CERS payment to their landlord in order to qualify for the moratorium on eviction.
The lack of requirement for the tenant to pay CERS funds to landlords may allow tenants to forego payment of commercial rents and pocket the CERS subsidies, without fear of eviction. Currently the law lacks teeth for commercial landlords and this oversight in the Ontario Moratorium Regulation should be remedied in order to ensure that government subsidies are applied as they were intended, not as tenants see fit.
The intention of Parliament, in creating CERS was to provide funds for the purposes of rent payments and other maintenance. However, the decision in Cherry Cola’s Rock N’ Rolla Inc. v Choi muddies the waters and commercial landlords cannot rely upon the assumption that CERS proceeds will be directed by tenants towards rent arrears.
The pandemic has been unequal in its impact, with some industries disproportionately affected compared to others. Neither CERS nor the Ontario Moratorium Regulation provide clarity to the plight of those commercial landlords whose tenants do not forward CERS payments. However, landlords and tenants who have been affected by the pandemic and subsequent public health restrictions, may be eligible for the Canada Emergency Wage Subsidy (CEWS) among other emergency economic relief. To learn more visit: https://www.canada.ca/en/department-finance/economic-response-plan.html#businesses
REMEDIES FOR COMMERICAL LANDLORDS
A landlord is not prevented from changing the locks and evicting or seizing a commercial tenant’s assets, unless the tenant qualifies for the moratorium. Furthermore, there are remedies available to commercial landlords whether or not the tenant qualifies for the moratorium on evictions.
A landlord may claim for damages as a result of the tenant’s breach of the lease. This type of legal action can be based on any serious breach of the lease, including but not limited to rent arrears. This remedy provides the landlord the ability to enforce payment of any unpaid rent, including payments due throughout the pandemic and government closures even if the tenant remains in the premises.
Additionally, the landlord has the right to terminate the lease if the tenant fails to perform a monetary or other important obligation. Although, the Ontario Moratorium Regulation prevents the landlord from physically evicting tenants who qualify for the moratorium on evictions, the landlord has the right to evict such a tenant once the tenant no longer qualifies. It is likely as regulations across the province ease and more businesses are able to open their doors, that many tenants will no longer qualify for CERS and will lose the protections granted to them under the Ontario Moratorium Regulation.
These remedies are broad and can be affected by the terms of the lease, speak to an expert at Frank Feldman Law today.
Call today to learn more (647) 347-9573, ext. 1.