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Jun 12, 2020

Ontario Government's Pending Ban on Commercial Tenant Evictions

By: David Taub and Joseph Jamil

On June 3, 2020, following months of news about long-established businesses' permanently closing due to financial struggles related to COVID-19, Ontario Premier Doug Ford warned commercial landlords that his government would enact legislation to provide some relief for commercial tenants struggling to pay their rent. The Premier followed up on June 8 announcing that his government will introduce changes to the Commercial Tenancies Act (the “Act”) to protect small businesses. If passed, the proposed amendments to the Act would make it illegal to evict a commercial tenant until August 31, 2020.

This follows the current Canada Emergency Commercial Rent Assistance Program (the “CECRA Program”) implemented by the federal and provincial government.[1] The CECRA Program provides forgivable loans to commercial landlords who may face a potential decrease in rental revenue when tenants cannot afford rent payment during the COVID-19 pandemic.[2] Under the program, the federal and provincial government will provide forgivable loans to qualified landlords for 50 per cent of April, May and June rent. Loans are forgiven if the landlord cuts the tenants’ rent by at least 75 per cent. The tenant would cover the remaining 25 per cent.

A major criticism of the CECRA Program is that (a) it is voluntary; and (b) only available at the application of commercial landlords and not tenants. Anecdotally, there appears to be little take-up of the CECRA Program by Landlords. So further steps are necessary if the government intends on helping commercial tenants.

The Ontario government’s recent News Release, says the proposed changes to the Act  will “temporarily halt evictions of businesses that are eligible for” the CECRA Program. Further, the changes to the Act “would reverse evictions that occurred on or after June 3, 2020.” Ontario intends to amend the Act as soon as possible, and with Premier Ford’s parliamentary majority, we can expect to see such changes soon. Also, presumably the opposition parties would support this legislation or seek tougher measures in support of commercial tenants.

What Commercial Landlords Can Expect

  • Landlords will be unable to evict a tenant until August 31, 2020 under the proposed changes
  • Landlords should review their leases as there are likely other remedies available besides eviction (i.e. terminate the lease)
  • Landlords should find out if they are eligible for the CECRA Program
  • If non-payment of rent only became an issue during COVID-19, a Court may grant relief from forfeiture for the tenant

    What Commercial Tenants Can Expect

  • Temporary relief from being evicted until August 31, 2020
  • If tenants have been evicted prior to June 3, 2020, when the proposed changes are to retroactively be in effect, commercial tenants should consider applying to the court for relief from forfeiture

It is unclear whether the legislation will address the issue of the underlying rent obligation owing to the landlords. If the rent obligation is simply deferred, it is hard to see how this legislation will protect tenants in the long term because the accrued rent will come due at some point and the tenants benefitting from the eviction deferral will likely be unable to put the lease back into good standing. Nevertheless, given the uncertainties, landlords and tenants are encouraged to resolve issues before enforcing any remedies under the lease, particularly if payment of rent is an issue.

For further information or if you are concerned about your rights under a commercial lease, please do not hesitate to contact a member of Robins Appleby's litigation and dispute resolution team.

 

 



[2] For more information about the CECRA Program, including eligibility criteria, see: https://www.robinsappleby.com/resources/publications/details/ontario-announces-relief-for-commercial-tenants



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