During the earliest days of the COVID-19 pandemic, the federal and provincial governments laid out legislation for 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 be sure to contact a lawyer for legal advice before taking any legal action. That being said, we will do our best to explain the laws and rules as they stand now and the rights of both the commercial tenant and commercial landlord.
What laws apply?
Commercial Tenancies Act
The primary legislation governing commercial tenants and commercial landlords in Ontario is called the Commercial Tenancies Act. In the Commercial Tenancies Act, the various rights and responsibilities for the commercial landlord and the commercial tenant are laid out by the Ontario government. Recent amendments to the act, most recently in bill 229, add additional protection for a tenant and additional restrictions on the landlord during the pandemic. We will cover these changes in more detail later on.
The act also outlines the grounds for tenant eviction or termination and the process a landlord must follow in conducting an eviction or seizure of property. Until the beginning of the COVID-19 pandemic, the commercial tenancies act was the only relevant legislation governing commercial leases in Ontario.
The full Commercial Tenancies Act is available to read online. Because legal language is highly specific, most summaries will simplify to some extent. For any serious concerns in a commercial lease, it is best to consult the text of the act itself.
Changes in response to the COVID-19 pandemic
During lockdowns in 2020 and 2021, many commercial tenants were unable to operate and suffered losses. This resulted in many being unable to pay rent, with unpaid rent putting the landlord in a similarly tight spot. To protect small businesses across the country from failing, the federal government introduced successive bills for the purpose of lightening the load on struggling businesses and helping tenants survive 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. A rent reduction agreement with the landlord allowed the tenant to pay only 25% of their usual rate. While receiving assistance under CECRA, the tenant was protected by a moratorium on evictions. Though landlords and tenants both benefited from the program, it was up to the landlord to apply for the program. Loans and the temporary ban on evictions under the CECRA program ended on January 31, 2021.
Following CECRA, the federal government implemented the Canada Emergency Rent Subsidy program. This subsidy is available to eligible landlords and tenants who have experienced losses due to shutdowns and pandemic restrictions. The CERS is applied during a number of qualifying periods, each being about one month long. One important change is that the CERS is available to the tenant whether or not the landlord applies for the program.
To be eligible for the CERS program, a tenant or landlord must:
- Have or apply for a CRA business number.
- Be one of a list of eligible businesses, charities, or non-profit. This includes most businesses but excludes groups such as public institutions and corporations exempt from income tax.
- Have experienced a drop in revenue during the period of application. The specific drop in revenue required to apply is based on which period you are applying. Eligible revenue includes revenue generated in Canada by selling goods, rendering services, or other uses of a business’s resources.
- Have eligible expenses on an eligible property. Claimants can receive up to $75,000 per property up to a maximum of $300,000 to pay down these expenses.
The CERS program provides a maximum of 65% subsidy to businesses, with an additional 25% for businesses forced to close due to mandatory public health orders. CERS loans can be put towards expenses such as outstanding rent, property tax, utilities and more.
More specific info on eligibility and terms is available online from the Government of Canada.
Similar to CECRA, CERS also provides a new moratorium on commercial tenancy evictions and suspends the right of re-entry for eligible commercial tenancies who have provided proof of participation in CERS. The temporary ban on evictions for CERS approved businesses is still ongoing.
Amendments to the CTA
Ontario’s Bill 229, passed in December 2020, integrated the temporary ban on evictions and other changes due to CERS into the CTA.
New temporary rules in Bill 229
The rules for the non-enforcement period for evictions are as follows:
- Judges may not order a writ of possession for arrears of rent before or during the non-enforcement period.
- Prohibits landlords from exercising the right of re-entry during the non-enforcement period.
- Prohibits landlords from seizing unsold goods or property as distress from rent arrears during the non-enforcement period.
- Requires any landlord who had exercised the right of re-entry between October 31, 2020, and the start 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 last 12 weeks. If you believe you have been wrongfully evicted by your landlord, you have the legal right to take action against your landlord, either through reinstatement of your property access or payment of damages.
For wrongful evictions outside of the protections under CERS, recourse will depend on your particular scenario. For example, if you are evicted for failure to pay rent but had a previous agreement for rent abatement, this is different than an outright and willful refusal to pay and may help you in fighting the eviction.
What commercial landlords need to know
Any landlord with tenants who are receiving CERS assistance may not re-enter the property or seize a tenant’s goods. Any order of eviction is not enforceable until after the end of the non-enforcement period. Should you decide to act on an eviction, you will be required to reverse your decision or pay damages to the aggrieved tenant. Consider looking into the ways that CERS can benefit landlords if you haven’t already.
It is also worth noting that eviction moratoriums do not apply to landlords looking to sell their properties during the pandemic, though there are still some considerations if you go this route.
Assuming your tenant is not participating in any government programs, or the enforcement periods have ended, the following rules apply for commercial evictions, as described by the Commercial Tenancies Act.
Standard rules under the CTA
Though things right now are complicated to some extent, the rules of the CTA will likely revert some time next year to remove special considerations added due to the pandemic. What follows is more general procedures for evictions in Ontario.
Eviction of commercial tenants
In most commercial leases, the landlord and new tenant agree on terms that are ground for terminating the lease. The most common and obvious clause in a lease is the payment of the agreed amount of rent, on the agreed dates. If the tenant fails to pay rent, they are subject to recourse. Tenants are also subject to further obligations comprising the material conditions of the lease. Such obligations include things like building maintenance and or insurance rules. In nearly every commercial lease, a landlord is entitled to evict a tenant for not paying rent or a material breach of the lease conditions, but terms of each specific lease will vary. Often the tenant is given a period of time in which to address and cure the offending breach, so eviction is not necessarily a surprise.
However, businesses eligible for CERS who have received approval are still protected as long as the eviction moratorium is in place. Currently, the ban on evictions applies until April 30, 2022 at the latest. No landlord may exercise an eviction order to any tenant approved to receive CERS. Tenants who produce proof of CERS approval are protected for up to 12 weeks following approval. If the tenant reapplies before the 12 week period is up, their protection continues for an additional 12 weeks.
Furthermore, it is not always clear when a commercial tenant has committed a breach of the lease. Like any legal document, a lease is subject to interpretation. The lease dispute may be required to be brought before a court for determination, in which case both parties should consult legal advice.
It’s important to note that CERS protection applies only to rent arrears and not other commercial lease violations such as issues relating to building repairs or insurance. In these cases, the applicable process and remedies apply as normal.
Eviction for non-payment of rent
In the case of non payment of rent the landlord has two courses of action. Firstly, the landlord has the right to re-enter the premises. Usually this includes changing the locks and preventing the tenants use of the property, and is effectively an eviction and termination of the lease.
Another option available to landlords is possession of tenant’s property and goods, as a distress for rent arrears. These goods may be sold off to cover losses incurred from unpaid rent. In both cases the landlord is required to provide advanced notice to the tenant – sixteen days notice for re-entry and five days notice for possession of the tenant’s assets.
Eviction for a material breach of the lease
A commercial lease may include other obligations for the tenant. These obligations may include provisions concerning insurance requirements, repair and maintenance obligations, and safety and building regulations. While a landlord may end the lease due to such a breach, they are not able to possess unsold goods and property.
Legal matters become very complicated very fast. If you need help, we recommend consulting official government sources, or getting in touch with a real estate lawyer.