A commercial tenant falling into arrears is unfortunately a
not-infrequent occurrence. Faced with a non-paying tenant,
commercial landlords have a number of options to enforce their
First, the landlord can distrain for the arrears pursuant to the
Rent Distress Act. This typically involves retaining a
bailiff to seize and sell the tenant's personal property in
order to pay the arrears of rent. Distraint can be a particularly
useful remedy where the tenant has valuable inventory or other
property on the premises. Often the mere threat that their property
will be seized and sold will result in a non-paying tenant coming
to terms with the landlord.
One disadvantage to this option is that it may effectively put
the tenant out of business, meaning that as a practical matter, any
recovery may be limited to the proceeds of the distraint. A
landlord also cannot sue for arrears of rent while there is an
outstanding distraint. A further disadvantage is that landlords may
face exposure to damages for wrongful distraint if the formalities
of the Act are not strictly adhered to or there is a
dispute over whether the landlord is entitled to distrain, for
example, because the lease has either ended or been terminated, or
the tenant has properly tendered the rent to stop the distress. In
some cases, the principals of a corporate landlord can be held
personally liable for an illegal distraint.
Second, a landlord can re-enter the premises and terminate the
lease. When a landlord is permitted to do so may depend on the
terms of the lease, however most commercial leases typically give a
landlord the right of re-entry and termination for non-payment of
rent. Most leases will set out pre-conditions for the exercise of
this right, such as delivering notice of default and giving the
tenant an opportunity to cure. It is important to ensure any such
pre-conditions are strictly adhered to.
Once the lease is terminated, the landlord has the right to sue
for the arrears due at the date of termination. The landlord can
also sue for damages for lost rent over the remaining term of the
lease, however the landlord must give express notice to the
defaulting tenant of its intent to claim for damages. In addition,
the landlord must make reasonable efforts to mitigate by finding a
new tenant and re-letting the space.
Lastly, a landlord can affirm the lease and periodically sue the
tenant for the arrears of rent as they come due. Where a landlord
has elected to affirm the lease, there is no duty to mitigate by
finding a new tenant – the landlord is entitled to continue
to sue for the arrears as they become due for the balance of the
term of the lease, or until it is terminated. This might be an
attractive option to a landlord where the prospects for re-letting
the space are poor and where the landlord is confident of its
ability to collect on a judgment against the tenant. In other
cases, it might be more practical to terminate the lease and find a
While the choice of remedy is often a business decision for
commercial landlords, there are potential pitfalls associated with
each of these remedies. Landlords faced with a non-paying tenant
are therefore well advised to seek legal advice before exercising
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.
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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