Canada: Five Important Things To Know If Your Retail Tenant Is Insolvent

While many landlords know what to do if their tenant is in default or likely insolvent, in our experience, once that tenant starts a bankruptcy or other insolvency process many landlords feel there is little they can do. Afraid to throw good money after bad, landlords often elect not to retain counsel and instead sit on their hands in frustration, not knowing that a more active approach could get them better results. However, experienced bankruptcy and insolvency counsel can do much more for a landlord than just help it fill out a proof of claim form. Here are just five of the many reasons why retaining experienced bankruptcy and insolvency counsel can make a big difference.

1. All Bankruptcies are not Created Equal

The first mistake that many landlords make is not appreciating the difference between a bankruptcy and a bankruptcy proposal or a restructuring under the Companies' Creditors Arrangement Act (the "CCAA"). In a bankruptcy, the landlord's options are relatively few and their rights are relatively codified. However, if it is a bankruptcy proposal, the rules are different. Major chains of stores almost never go straight into bankruptcy. In recent events, Boutique Jacob filed a proposal, Mexx filed a proposal, and Bowring and XS Cargo each used the CCAA in connection with their insolvency proceedings. None of these corporations went straight into bankruptcy (although Jacob and XS Cargo ended up there). In a proposal or restructuring proceeding, the tenant often needs the vote of its landlord to actualize its plans. Indeed, in most retail bankruptcies, the landlords collectively will be the largest single voting bloc, therefore having a material influence on the direction the proceedings will take. Retaining experienced bankruptcy and insolvency counsel to speak with other landlords in order to try to form a unified front can be very effective in improving the outcome of the insolvency for landlords.

2. You Can Ask for More?

Bankruptcy or restructuring proposals are just that: a proposal. However, many take it as a, "take it or leave it" proposition, even where the proposal is patently ridiculous. For example, the recent Boutique Jacob proposal offered landlords less than 1 cent on the dollar and allowed the principal of Jacob to retain the name, possibly to start a profitable online business, possibly to use it in tax planning, but definitely for some new business purpose which was not fully explained. Nonetheless, 95% of the creditors accepted this offer and, as far as we know, not one took steps to ask for more. Experienced bankruptcy and insolvency counsel will tell you, the first offer in a proposal is seldom the best offer the debtor is prepared to make. However, a lowball first offer is based on the often true belief that creditors will not take the time to retain counsel and ask for more. Experienced bankruptcy and insolvency counsel can analyze the proposal and advise where the opportunities are to receive better treatment.

3. Your new Tenant is going to be who?!?

It is established that in a bankruptcy, the trustee can assign a lease without the consent of the landlord, provided it meets certain criteria. However, you may not know that in a proposal or a CCAA proceeding, the law was recently amended to also allow for such an assignment. In order to have the best chance of making sure that the landlord has some degree of control over its space and some input on whether or not its lease may be assigned, and to whom, the landlord needs counsel. A landlord who is active in the insolvency process can ensure that the insolvent tenant is held to a strong standard before an assignment is granted, or may even prevent the assignment entirely. A landlord needs counsel to be on the service list to make sure that it has notice of motions, either by the tenant looking to assign its lease or by other parties bringing motions that may impact whether or not the lease will be assigned. It may also be that a landlord taking an active approach can influence a tenant to elect to simply terminate its lease and not assign it, which may be a preferable outcome.

4. Hate the game, but know the Players

This can't be overstated: there are only so many experienced counsel who really know how to deal with bankruptcy and insolvency matters before the courts in Ontario and there are a small number of judges who oversee these matters. The truth is, we all know each other. Given how important your leases are to your business, you want someone looking out for your interests whose presence is going to be taken seriously by the other players in this game. When we write to opposing counsel to tell them we are bringing a motion, they know it is not frivolous and that we can follow through. Remember to hire expert insolvency counsel when dealing with bankruptcy and insolvency matters. This is a must in bankruptcy and insolvency scenarios. Your regular leasing counsel will not be able to do the same job that bankruptcy and insolvency counsel will. As the saying goes, "A good lawyer knows the law, but a great lawyer knows the judge!"

5. Making a Good Exit instead of Quick Getaway

Often the insolvency process ends with the premises being abandoned or sold to someone else. Either way, your relationship with your tenant is often about to end. However, experienced bankruptcy and insolvency counsel will help make sure that 1) the premises is not left in a state of repair that is not in keeping with the lease or the rules governing insolvency, and 2) that you are paid rent for the entire restructuring process.

There are situations where an insolvency process can change from a proposal to a bankruptcy. In this scenario, a landlord who has not taken steps during the insolvency process to protect themselves can be left with a very unsatisfactory unsecured claim in a bankruptcy. By taking the necessary protective steps in one of the recently large retail insolvencies, other landlords lost as much as $100,000 from the sudden bankruptcy, while our client suffered no loss at all. In fact, in that case, due to steps we took, our client suffered no loss and the tenant paid our legal fees, too.

The current system is certainly designed to give the tenant the advantage in the hope that the tenant will be able to restructure and resurface as a healthy corporation. While this is a celebrated goal, in our view, all too often the road to that goal is paved over the backs of landlords. Experienced bankruptcy and insolvency counsel can help a landlord limit  the negative side effects of the insolvency of your tenant and, at a minimum, help to mitigate loss and put the landlord in a much better position to make a clean transition to a better, rent-paying, and solvent tenant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions