A Commercial Tenant Fails to Pay Rent and Gets Locked Out: Will the court let them back in?

The scenario is not terribly unusual, especially in tough times. A commercial tenant falls behind in rent and fails to bring it current notwithstanding the landlord’s demands. The landlord finally decides to terminate the lease and arranges to have the locks changed, shutting the tenant’s business down. The tenant scrambles to find the money to bring the rent into good standing so that he can save his business. Is it too late?

A tenant in such circumstances does have the right to ask the Court to order the landlord to let the tenant back in, under the doctrine of relief from forfeiture.

As the Court pointed out in the case of 931576 Ontario Inc. v. Bramalea Properties Inc., generally speaking the Courts do not look favourably upon the forfeiture of a lease. Where a lease has been terminated for non-payment of rent, the Court will generally grant relief from forfeiture where the tenant comes to Court with “clean hands”, there has been no outright refusal by the tenant to pay rent, the rent has been in arrears for only a short time, and the landlord has not suffered any serious loss because of the delay in paying rent.

Where the tenant has breached terms of the lease other than those relating to the payment of rent, its chances of obtaining relief from forfeiture will depend upon its ability to remedy the default. In the case of non-monetary defaults, the landlord is obliged under Ontario legislation to provide the tenant with notice of default and a reasonable opportunity to cure it. If a default is curable but the time given by the landlord in which to remedy it is unreasonably short so that the tenant does not have a realistic opportunity to address the issue, the tenant might reasonably expect to receive favourable consideration from a Court. If the breach cannot be remedied regardless of the amount of notice provided, the tenant should not expect to succeed.

Even where the issue is non-payment of rent and the tenant shows up in Court with a certified cheque in hand, that will not end the matter. Where the tenant’s track record in terms of the payment of rent and the observance of other covenants in the lease is poor, or the tenant’s behaviour generally has been disruptive, the Court may well determine that the tenant has not come to Court with clean hands and the tenant’s application for relief from forfeiture will be denied.

As in most business relationships, one reaps what one sows. Tenants should be mindful of the fact that their behaviour during the currency of the lease may well be relevant in the event of a breach at some future date. Landlords wishing to be rid of problem tenants should be ready to pounce in the event of what may be even a minor breach, as a tenant in such circumstances may be unable to get back in even if they are ready and able to bring the rent into good standing.

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