Commercial Leases and the Impact of COVID-19

The novel coronavirus (COVID-19) continues to affect the day-to-day lives of millions of Canadians. As a result, businesses continue to face issues regarding cash flow, which in turn forces those businesses into difficult decisions as to which obligations they will pay, and which obligations will need to be deferred.

One of the consequences of these difficult decisions is that commercial landlords are now faced with tenants who either cannot pay their rent, do not wish to pay rent or have abandoned or are contemplating the abandonment of leased property. While COVID-19 gives rise to new business considerations, as will be seen below, the rights of the commercial landlord remain relatively unchanged.

This article, originally posted to our website in May, 2020, was amended on June 15, 2020 to reflect the emergency order issued by the Government of Saskatchewan in relation to the eviction of commercial tenants. This moratorium was issued pursuant to the provisions of The Emergency Planning Act.

It should be noted that the moratorium issued only applies to landlord who were eligible, but declined to apply, for the Canada Emergency Commercial Rent Assistance program (“CECRA”). This moratorium was issued in large part to assist new businesses in reopening during COVID-19.

Your Tenant Cannot (or Will Not) Pay Rent

 

As was the case before COVID-19, where a tenant fails to pay rent in a timely fashion the landlord, who has applied under the CECRA, is able to demand the rent and as permitted under the lease, takes steps to distrain or evict the tenant and take possession of the property. The Saskatchewan Legislature has, at this time, not taken any steps to alter the rights and remedies of the commercial landlord.

Before concluding that the tenant is offside their obligations by way of non-payment of rent, consideration should be given to whether the lease has a force majeure clause and if so, what effect that clause may have on the tenant’s position. For more information on this subject, Marinko Jelovic has prepared an article, Force Majeure and the Doctrine of Frustration – COVID-19, which addresses this issue with more specificity. https://www.rslaw.com/2020/03/18/force-majeure-doctrine-of-frustration-covid-19/

Before deciding on a course of action, a landlord may wish to give consideration to their existing relationship with the tenant and the current economic climate. A tenant who has occupied the same property for an extended period of time or is in the midst of a long-term lease, and who has not voluntarily defaulted on payment may still be better than the alternative. When the time arises for the preventative restrictions imposed by the Government of Saskatchewan to be lifted, prospective new tenants may be a rare commodity. If you consider the business foundation for a long-term tenant to be sound you may prefer having your existing tenant when business resumes, rather looking for a new occupant. Short term pain may be balanced by long term gain.

On the other hand, if the tenant is in default and the history of the landlord-tenant relationship is not happy one, this may be an opportunity to end the relationship, with a view to attracting a more desirable tenant.

Much will turn on the landlord’s view of the value of its relationship with the tenant.

To the contrary, where a landlord has failed or otherwise declined to take part on the CECRA program, the landlord is now prevented from re-entering the property, terminating the lease or exercising the right of distraint. The Government of Saskatchewan has, at this time, limited the remedies available to a commercial landlord who has elected not to participate in CECRA.

Your Tenant Abandons Their Lease

 

In Saskatchewan the legislature has declined to, at this time, amend or enact new legislation that would affect a commercial landlord’s rights. As such, the provisions of The Landlord and Tenant Act continue to apply, as do the provisions of the lease itself.

Under The Landlord and Tenant Act, if the tenant abandons their lease leaving rent unpaid a landlord may exercise its right of distress. In doing so, the landlord is permitted to retain and sell personal property left on the premises by the tenant. However, given the current economic climate a landlord may wish to consider whether or not exercising their right of distress makes financial sense.

While The Landlord and Tenant Act permits the landlord to recover the costs of the seizure and sale of abandoned or seized property, the practical reality is that the property may not be worth the cost and effort of sale. Much will turn on the nature of the tenant’s business and the type of property present in the leased space. As businesses continue to attempt to cut down and reduce overhead costs, depending on the nature of the tenant’s business there may be a reduced, or non-existent, resale market for the goods due to COVID-19. Attempting to seize and sell the property may result in substantial costs being incurred, with little net recovery, if any, toward the unpaid rent.

However, if the decision is to move to terminate, or to accept abandonment, the landlord can proceed in the usual way. The landlord’s rights are largely governed by the lease. Most provide that the landlord may bring action to recover unpaid rent, as well as rent for the remainder of the term of the lease, should a tenant abandon its lease (subject of course to the duty to mitigate and find a new tenant as soon as reasonably possible, though depending on the short and mid-term commercial leasing market it may be of little moment). For more information on the subject, please see the following article on enforcing the landlord’s rights: https://www.rslaw.com/wp-content/uploads/2011/12/1226000394Enforcement-of-Commercial-Leases-A-Practical-Guide.pdf

It should be noted that nothing in the in the June 5 moratorium impacts the landlords rights in the event the tenant has abandon their lease. Similarly, the landlords right remain unaffected if the lease expired on or before June 4, 2020.

Where the lease expires after June 4, 2020, and the landlord has elected not to sign up for or participated in the CECRA

Conclusion

 

As the consequences of COVID-19 continue to be felt in the business community, and with no timeline as to when the government imposed restrictions will be softened or lifted, landlords will continue to face business decisions on how to deal with tenants who do not pay their rent. Consideration must be given to the risk of evicting a tenant and attempting to recover unpaid rent versus the cost and time spent attracting a new tenant. Landlords will know that when the Government of Saskatchewan lifts social distancing restrictions, it may still be several months before new tenants can be found, as the economy slowly recovers from the economic downturn. As such, maintaining strong business relationships during this pandemic may best serve to provide a practical benefit down the road. Where the relationship is not so strong, different considerations may apply, and ending the landlord-tenant relationship may be the best outcome.

For more information, please contact:

 

M Kim Anderson, Q.C.

306.933.1344

Email: mk.anderson@rslaw.com

 

Travis K. Kusch

306.933.1373

Email: t.kusch@rslaw.com

Robertson Stromberg Well-Represented as Best Lawyers

Best Lawyers™ recognizes extraordinary lawyers in private practice through an exhaustive peer-review process. Today, Best Lawyers™, published the 14th Edition of The Best Lawyers in Canada and we are pleased to announce that twelve lawyers from the firm have been honoured by their peers with the designation of Best Lawyer.

Lawyers named to The Best Lawyers in Canada publication were recognized for their professional excellence in their practice areas. In addition, elite individuals are recognized as “Lawyer of the Year” recipients. “Lawyer of the Year” honorees receive this award based on their extremely high overall feedback within specific practice areas and regions. We are particularly pleased to announce that Melvin Gerspacher Q.C. has been recognized as Lawyer of the Year in Tax Law.

Congratulations to the following RS Best Lawyers:

Misty Alexandre in Construction Law

M. Kim Anderson Q.C. in Banking and Finance Law as well as Insolvency and Financial Restructuring Law

Chris Donald Q.C. in Corporate Law

Melvin Gerspacher Q.C. in Tax Law.

Al Haubrich Q.C. in Trusts and Estates

Tiffany Paulsen Q.C. in Family Law

Jennifer Pereira Q.C. in Insurance Law

Les Prosser Q.C. in Corporate Law, Mining Law as well as Natural Resources Law

Reynold Robertson, Q.C. in Education Law

Scott Waters in Banking and Finance Law as well as Corporate Governance Law

Gary Young Q.C. in Corporation and Commercial Litigation as well as Insurance Law

Ken Ziegler Q.C. in Immigration Law

 

 

Benchmark Litigation Canada Lists RS as Recommended Firm in Saskatchewan

Benchmark Litigation Canada has published its guide to the leading litigation teams in the country.

The guide’s results are the culmination of a four-month research period during which time extensive interviews are conducted with litigators and their clients.  The researchers examine casework handled by the firms and seek opinions on litigators practicing within their province or practice area. Using this client and peer-review methodology, Benchmark strives to provide the most accurate and comprehensive coverage of the Canadian litigation market.

Robertson Stromberg is pleased to see that the firm is ranked as a Recommended Firm for the province of Saskatchewan. Lawyers singled out as “local litigation stars” include M. Kim Anderson in the area of Insolvency Law and Gary Young in the areas of Class Action, Commercial, Insurance, and Intellectual Property.   This designation reflects individuals who were recommended consistently as reputable and effective litigators by clients and peers.

Benchmark also lists Jennifer Pereira and Sean Sinclair as “future stars”.  This designation is given to “ones to watch”, lawyers who are rapidly building their reputations in the market.

 

 

Anderson and Steele Present to SUMA Members

Struggling with a complex tax enforcement issue? Want to avoid taking a property?

The Saskatchewan Urban Municipalities Association (SUMA) is offering the webinar How to Make Tax Collection Less Taxing.  Robertson Stromberg’s Kim Anderson, QC, and James Steele will talk about how to collect on those hard cases and options beyond The Tax Enforcement Act.

The webinar will be from 10:00 a.m. – 11:00 a.m. on January 22, 2019 and will include a 15 minute question and answer period.

For more information about SUMA or to register for this webinar, click here.

 

 

 

Twelve RS Lawyers named to 2019 Best Lawyers List

August 21, 2018 — Robertson Stromberg LLP is pleased to announce that 12 lawyers have been included in the 2019 Edition of The Best Lawyers in Canada. Since it was first published in 1983, Best Lawyers™ has become universally regarded as the definitive guide to legal excellence.

Best Lawyers has published their list for over three decades, earning the respect of the profession, the media, and the public as the most reliable, unbiased source of legal referrals. Its first international list was published in 2006 and since then has grown to provide lists in over 75 countries.

“Best Lawyers was founded in 1981 with the purpose of highlighting the extraordinary accomplishments of those in the legal profession. After three decades, we are proud to continue to serve as the most reliable, unbiased source of legal referrals worldwide,” says CEO Phillip Greer.

Lawyers on The Best Lawyers in Canada list are divided by geographic region and practice areas. They are reviewed by their peers on the basis of professional expertise and undergo an authentication process to make sure they are in current practice and in good standing.

Robertson Stromberg LLP would like to congratulate the following lawyers named to 2019 The Best Lawyers in Canada list:

  • Misty S. Alexandre- Construction Law
  • M. Kim Anderson- Insolvency and Financial Restructuring Law, Banking and Finance Law
  • Christopher J. H. Donald- Corporate Law
  • Melvin A. Gerspacher- Tax Law
  • Allan M. Haubrich- Trusts and Estates
  • Tiffany M. Paulsen- Family Law
  • Jennifer D. Pereira- Insurance Law
  • Leslie W. Prosser- Natural Resources Law, Corporate Law, Mining Law
  • Reynold A. Robertson- Education Law
  • Scott D. Waters- Banking and Finance Law, Corporate Governance Practice
  • Gary D. Young- Insurance Law, Corporate and Commercial Litigation
  • Kenneth K. E. Ziegler- Immigration Law

Anderson and Steele Present at SRPA Convention

The Saskatchewan Regional Parks Association (SRPA) represents the many and diverse regional parks throughout Saskatchewan.  Each year the SRPA holds conventions for the purpose of education and networking for the delegates.

This year at the convention held in Saskatoon on April 7th, Kim Anderson, Q.C. and James Steele will be offering legal and practical advice on Regional Park seasonal campsites and tenancies.

 

 

Lawyers M Kim Anderson