Question: "I've given some of my commercial tenants a deferral on rent for the next three months. I don't need to remit GST on the rent until I receive it, right?"
In British Columbia, commercial landlords do not have a general right to re-enter the leased premises on the tenant's default. This right must be spelled out in the commercial lease.
When a tenant defaults on rent, one of the remedies available to commercial landlords is that of terminating the lease and re-entering to take back possession. The Commercial Tenancy Act contains rules to regulate this remedy. When exercising this right, landlords do well to ensure that their actions are carried out closely in accordance with the Act’s provisions.
When a commercial tenant falls into arrears, the landlord has a number of options against the tenant. However, to ensure a successful result, landlords must understand the remedies available to them and the legalities surrounding these.
In our previous posts, here and here, we discussed some of the rules and formalities surrounding a commercial landlord's right to distress when a tenant defaults on rent. In this week's post, we will focus on further cautions to heed before seizing a tenant's goods as a means to recover arrears in rent. A number of these considerations revolve around the timing of events.
In our last post, we discussed one of the biggest faux-pas in exercising the landlord's right to distress. In their zeal to recover arrears in rent, some commercial landlords have simultaneously terminated the lease and thus, by their own hand, have rendered their distress action illegal. This week, we examine yet more technical details that, if not carefully observed, risk jeopardizing the interests of landlords who turn to this self-help remedy.
When a tenant defaults on rent, one of the remedies open to commercial landlords is rent distraint. While landlords may know of the concept, the actual execution must be carefully handled. Otherwise, unwary landlords could easily see this self-help remedy turn into a double-edged sword rife with unintended and unfavourable consequences.
A tenant's default creates alternative remedies for a landlord, and landlords must be clear and consistent in choosing the remedy that best protects their interests. A recent BC case emphasizes the pitfalls that await landlords who fail to do so. In Stearman v. Powers, the tenant had stopped paying rent and a month later vacated the premises, telling the landlord that he was terminating the lease due to alleged defaults in the premises (these alleged defaults were later rejected by the court). The landlord did not accept this termination and sued the tenant in Small Claims Court for each month's rent.
If a commercial landlord is going to illegally terminate their tenant's lease, they should pick a tenant which is going out of business anyway. That is the tongue-in-cheek message behind Shanahan v. Turning Point Restaurant Ltd., a recent decision of the BC Court of Appeal. The case also emphasizes the importance for landlords of careful consideration before terminating a tenant's lease.
Landlords, or their realtor agents, often make assurances to prospective tenants about such things as future advertising plans, or expectations regarding future tenants of adjoining premises. Some of these landlord statements become incorporated into the lease; others do not. Commercial leases almost always contain an "entire agreement" clause, which confirms that there are no agreements or representations between the parties, other than what is set out in the written lease. This clause gives certainty to the "deal" between the parties, and is intended to prevent tenants from trying to rely on some previous statement given by the landlord outside the lease. If tenants wish to be clear that some such statement is part of their tenancy, they need to insist that the statement be put in the written lease.
Commercial landlords facing a non-paying tenant have a number of choices available to them. These include terminating the lease, and seizing their tenant's goods using the right of distraint. Landlords can do either of these things. But they can't do both. An Ontario landlord recently learned this the hard way in Tosomba v. Base General Contracting Ltd. The landlord changed the locks on the premises following ongoing non-payment of rent by the tenant, and refused to release any of the tenant's goods until the arrears were paid. The outstanding rent was disputed, but appeared to be less than $10,000. The value of the tenant's goods was estimated at $50,000.