The Ontario government recently passed the Protecting Small Business Act, 2020, amending the Commercial Tenancies Act to temporarily halt or reverse evictions of commercial tenants and to protect those tenants from having their assets seized or being locked out during COVID-19.
The restrictions apply to: (1) landlords eligible to receive assistance under the Canada Emergency Commercial Rent Assistance for small business program (the “CECRA”); and (2) landlords who would be eligible to receive assistance under the CECRA if the landlord entered into a rent reduction agreement with the tenant containing a moratorium on eviction.
The legislation, though, raises several significant questions, primarily around the definition of “eligible”. Under the CECRA a landlord is likely only eligible if a tenant is also eligible, but what happens if a tenant fails to co-operate? If challenged in court, how will a judge interpret eligibility?
Of specific concern is the fact that the restrictions apply to those landlords who would be eligible if a rent reduction agreement was entered into. What happens if a landlord is willing to enter into the rent reduction agreement, but the tenant is not? Under a strict reading of the legislation, that landlord would still not be allowed to evict the tenant for non-payment of rent.
If the restrictions apply, a judge is not allowed to order a writ of possession that is effective during the non-enforcement period if the basis for ordering the writ is an arrears of rent. The non-enforcement period starts June 18, 2020 and runs until September 1, 2020, unless terminated earlier.
During the non-enforcement period landlords are also prohibited from exercising a re-entry right, and if a landlord exercised a right of re-entry on or after May 1, 2020, possession must be returned to the tenant. If possession can’t be returned to the tenant, the landlord must compensate the tenant for all damages sustained by the tenant by reason of the inability to restore possession.
Landlords are also prohibited from seizing any goods or chattels as a distress for arrears of rent, and if the landlord seized any goods or chattels as distress for arrears of rent on or after May 1, 2020, any unsold goods and chattels must be returned to the tenant.
Any landlord who fails to comply with these requirements is liable to the tenant for any damages sustained by the person as a result of the contravention or non-compliance.
It’s important to remember that these restrictions only apply to those landlords eligible to receive the CECRA, or who would be eligible to receive the CECRA if a rent reduction agreement was entered into. Other commercial tenancy arrangements remain unaffected.
The legislation also does not apply to landlords approved to receive the CECRA, since in those cases the landlord and tenant relationship would be instead governed by the rent reduction agreement and the terms of the CECRA program.
COVID-19 continues to have a significant impact on many aspects of our lives, and has created an ever-changing legal landscape. The restrictions discussed above are subject to change, perhaps with very little notice. If any landlord or tenant has any questions around their commercial lease arrangement it is more important than ever to speak with their lawyer for legal advice.