During the early days of the COVID-19 pandemic, federal and provincial governments legislated a temporary ban on the eviction of commercial tenants. With new bills coming and going, and rules for landlords and tenants seemingly in flux all the time, many people are confused about the current status of commercial tenant evictions in Ontario.
This article is for both commercial tenants and commercial landlords. This article does not constitute legal advice, so please consult a lawyer for legal advice before taking legal action. That said, we will do our best to explain the laws and regulations as they are and the rights of both the commercial tenant and commercial landlord.
Which laws apply?
Commercial lease law
The primary legislation that regulates commercial tenants and commercial landlords in Ontario is called the Commercial Tenancies Act. The Commercial Tenancies Act defines the various rights and responsibilities for the commercial landlord and commercial tenant by the Ontario government. Recent changes to the law, most recently in Bill 229, add additional protections for a tenant and additional restrictions on the landlord during the pandemic. We will return to these changes in more detail later.
The law also outlines the grounds for eviction or termination of tenants and the process a landlord must follow when carrying out an eviction or repossession of property. Until the onset of the COVID-19 pandemic, the Commercial Lease Act was the only relevant law for commercial leases in Ontario.
The complete Commercial lease law is available to read on the Internet. Since legal language is very specific, most summaries will simplify somewhat. For serious concerns with a commercial lease, it is best to consult the text of the law itself.
Changes in response to the COVID-19 pandemic
During lockdowns in 2020 and 2021, many commercial tenants were unable to work and lost members. This resulted in many being unable to pay the rent, while unpaid rent put the landlord in an equally tight position. To prevent small businesses across the country from going bankrupt, the federal government has introduced successive bills to ease the burden on struggling businesses and help tenants survive the lockdowns.
The first of such programs was known as the Canada Emergency Commercial Rent Assistance (CECRA) program. This allowed commercial landlords to receive assistance, intended to subsidize a rent reduction for the commercial tenant. Due to a rent reduction agreement with the landlord, the tenant could only pay 25% of the usual rate. While receiving assistance under CECRA, the tenant was protected by a moratorium on evictions. While both landlords and tenants benefited from the program, it was up to the landlord to sign up for the program. Loans and the temporary ban on evictions under the CECRA program ended on January 31, 2021.
After CECRA, the federal government implemented the Canada Emergency Rent Subsidy program. This grant is available to eligible landlords and tenants who have suffered losses due to closures and pandemic restrictions. The CERS is applied over a number of qualification periods, each lasting approximately one month. An important change is that the CERS is available to the tenant regardless of whether the landlord applies for the program or not.
To be eligible for the CERS program, a tenant or landlord must:
- Have or apply for a CRA company number.
- Be one of a list of eligible companies, charities or non-profit organizations. This includes most corporations, but not groups such as public institutions and corporations that are exempt from income tax.
- Have experienced a drop in sales during the application period. The specific drop in sales required to apply is based on the time period you apply. Eligible income includes income generated in Canada through the sale of goods, the provision of services, or other use of a company’s resources.
- Have eligible expenses on a qualifying property. Plaintiffs can receive up to $75,000 per property up to a maximum of $300,000 to pay these costs.
The CERS program grants up to 65% subsidy to businesses, with an additional 25% for businesses forced to close due to mandatory public health measures. CERS loans can be used for expenses such as outstanding rent, property taxes, utilities, and more.
More specific information about eligibility and conditions is: available online of the Government of Canada.
As with CECRA, CERS also provides for a new moratorium on commercial lease evictions and suspends the right of re-entry for eligible commercial leases that have provided proof of participation in CERS. The temporary eviction ban for CERS-approved companies is still in effect.
Changes to the CTA
Ontario’s Bill 229, passed in December 2020, integrated the temporary ban on evictions and other changes brought about by CERS into the CTA.
New Temporary Rules in Bill 229
The rules for the non-execution period for evictions are as follows:
- Judges may not impose an attachment on rent arrears before or during the execution period.
- Prohibits landlords from exercising the right of return during the non-enforcement period.
- Prohibits landlords from seizing unsold goods or property as a charge for rent arrears during the non-enforcement period.
- Required by any landlord who had exercised the right of re-entry between October 31, 2020 and the beginning of the non-enforcement period, to return access to the tenant or pay damages.
What commercial tenants need to know
Commercial tenants are only protected by the eviction moratorium as long as they are approved for CERS assistance or have been within the past 12 weeks. If you believe you have been unfairly evicted from your home by your landlord, you have a legal right to take action against your landlord, either by restoring access to your property or paying damages.
For wrongful evictions outside the protections under CERS, the recourse depends on your particular scenario. For example, if you are evicted for not paying rent, but previously had a rent reduction agreement, this is different from an outright and deliberate refusal to pay and can help you fight the eviction.
What commercial landlords need to know
Any landlord with tenants receiving CERS assistance may not re-enter the premises or seize a tenant’s property. A deportation order is only enforceable after the end of the non-execution period. If you decide to evict, you must reverse your decision or pay damages to the injured tenant. If you haven’t already, consider exploring the ways CERS can benefit landlords.
It’s also worth noting that eviction moratoriums do not apply to landlords looking to sell their properties during the pandemic, although there are still some considerations if you go this route.
Assuming that your tenant does not participate in government programs, or the enforcement periods have expired, the following eviction rules apply, as described in the Commercial Lease Act.
Standard Rules Under the CTA
While things are complicated to some degree right now, the CTA’s rules will likely return next year to remove special considerations added as a result of the pandemic. What follows are more general eviction procedures in Ontario.
Eviction of commercial tenants
In most commercial leases, the landlord and the new tenant agree on terms that are grounds for terminating the lease. The most common and obvious clause in a rental agreement is the payment of the agreed rental amount, on the agreed dates. If the tenant does not pay the rent, he must seek redress. Tenants are also subject to further obligations which include the material terms of the lease. Such obligations include building maintenance and/or insurance policies. In almost every commercial lease, a landlord has the right to evict a tenant for failure to pay rent or a material breach of lease terms, but the terms of each specific lease will vary. Often the tenant is given a time frame to address and remedy the infringing breach, so eviction is not necessarily a surprise.
However, companies eligible for CERS that have received approval are still protected as long as the moratorium on eviction is in effect. Currently, the eviction ban is in effect until April 30, 2022. No landlord may exercise an eviction notice against a tenant who has been approved to receive CERS. Renters who provide proof of CERS approval are protected for up to 12 weeks after approval. If the renter reapplies before the 12-week period has expired, their protection will continue for another 12 weeks.
In addition, it is not always clear when a commercial tenant has breached a lease. Like any legal document, a lease is subject to interpretation. The rental dispute may need to be brought before a court for determination, in which case both parties should seek legal advice.
It is important to note that CERS protection only applies to rent arrears and not to other violations of commercial leases, such as issues related to building repairs or insurance. In these cases, the applicable procedures and remedies normally apply.
Eviction due to non-payment of rent
In case of non-payment of the rent, the landlord has two options. First, the landlord has the right to re-enter the property. Usually this involves changing the locks and preventing the tenants from using the property, and is basically an eviction and termination of the lease.
Another option available to landlords is to own the tenant’s property and property, as an emergency for rent arrears. These goods can be sold to cover losses incurred from unpaid rent. In either case, the landlord is required to give the tenant advance notice – sixteen days’ notice for return and five days’ notice for possession of the tenant’s assets.
Eviction for a material breach of the lease
A commercial lease may entail other obligations for the tenant. These obligations may include provisions on insurance requirements, repair and maintenance obligations, and safety and building regulations. While a landlord may terminate the lease as a result of such a breach, it cannot dispose of unsold goods and property.
Legal matters get very complicated very quickly. If you need help, we recommend that you consult official government sources or contact a real estate attorney.