Q: Does my company have to agree to accept reduced or delayed payments from customers because the COVID-19 pandemic is so serious?
A: From a business relationship perspective, it may be sensible to negotiate modified payment terms but your strict legal rights will be determined by the specific contractual arrangements in place between the parties. Absent specific language, most commercial contracts will entitle you to insist on full payment and on time regardless of your customer's circumstances arising from the pandemic. Any agreed alteration to your contractual arrangements should be clearly set out in writing and specify whether payments are being forgiven or only deferred – and for how long – so there is no inadvertent waiver of a right to claim full payment at some future time.
Q: With the effective closure of the BC courts for all but the most urgent matters, how can I resolve my business dispute without waiting for the courts to reopen?
A: Mediation and arbitration are effective private procedures that can be used to resolve disputes in a timely and cost-effective way and in a manner that complies with all appropriate health and safety guidance. Mediation is essentially a settlement negotiation facilitated by an independent mediator who attempts to bring the parties to an acceptable compromise. If no agreement is reached, all of the negotiations and offers made are privileged and cannot be used by either party in the litigation going forward. Conversely, an arbitration is a private, streamlined trial of sorts which is held before a neutral arbitrator (usually a retired judge or senior lawyer agreed to by the parties). Most of the evidence is tendered in written form by way of affidavits although certain key witnesses may be cross-examined if necessary. The decision is binding on the parties like a regular court judgment and is subject to appeal to the BC courts only on very limited grounds.
Q: I have a claim that I have been sitting on for some time and know there are time limits on filing such claims with the courts. Is everything on hold right now?
A: While some provinces, such as Ontario, have recently passed laws to suspend the running of "limitation periods" to start lawsuits, as of now, BC has not yet done so which means the clock to start an action in the Province is still running and your claim could be "time barred" if it is not filed in time. BC courts allow for the electronic filing of legal documents (which some other provinces do not) which may account for the current discrepancy in approaches. In BC, most claims are subject to a two year limitation period but there can be complex questions regarding just when the clock begins to run so each situation will be different. It is important to seek timely legal advice concerning any claims that have been withheld up to this point.
Q: I don't see anything on your resource site regarding the issues surrounding commercial lease payments coming on April 1st, for businesses that have been ordered closed. There has also been very little on this from the various levels of govt. I've only seen some comments about the 50% tax reduction which may or not flow through to tenants, and similarly, mortgage deferrals and whether landlords will pass those interest savings on the tenants.
A: Every commercial lease is unique and it's best to review your particular situation with a lawyer. That said, I can make the following general comments:
- You're correct that tenants will likely be required to pay rent under their commercial leases notwithstanding the current pandemic. Most leases provide that rent must be paid without abatement or setoff.
- Notwithstanding the above comment, it's worth noting that lease terms can vary widely. It's important to review the particular contract. For example, a lease may have a force majeure clause which might address the highly unusual situation we now face. The wording of these types of clauses, however, wouldn't usually assist a tenant facing COVID 19 business interruptions.
- There is also the possibility of an argument for some form of relief under a legal concept known as the doctrine of frustration as contemplated by legislation such as B.C.'s Frustrated Contract Act. Again however, previous Court decisions do not appear to support an argument for avoiding the contractual obligations of a lease due only to the sort of issues raised by the pandemic.
Despite what appears to be an ongoing requirement for landlords and tenants to continue to perform their lease obligations, I am hearing from both sides that many are engaged in discussions to adapt to the problems they are facing. As you'd guess, most landlords would like to see their premises rented and most tenants would prefer to "weather the storm" and be in a position to resume business down the road. To that end, parties are discussing the possible deferment of rent for the month of April with an agreement to revisit matters again prior to May. It's worth remembering that landlords continue to have to meet their ongoing operating costs and so I've also heard of parties negotiating towards a partial payment of rent for April with, again, a promise to revisit matters prior to the following month. Based on my experience, it would likely be much better for an agreement to be reached, even if a temporary one, than to see a lease go into default. Any such agreement should, of course, be reduced to writing. A lawyer can help in preparing that document.
Finally, I'd add that the our governments are looking at relief packages on various fronts. The prospect of relief for small businesses might also argue for a temporary deferment agreement on rent. A deferral would provide some time to see if other solutions arise.
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