A Commercial Landlords Remedies Under a Valid Lease

 A landlord has five basic options when a commercial lease goes into default:
1. affirm the lease and sue for amounts due;
2. affirm the lease and distrain the tenant’s goods on the premises for rent in arrears;
3. terminate the lease and re-enter the premises;
4. affirm the lease and relet the premises on the tenant’s account; or
5. negotiate a surrender of lease.

Importantly: Choosing one of these options will often foreclose the possibility of choosing another alternative, therefore it is often in your best interest to discuss these options with your lawyer prior to proceeding.

1. Sue for Amounts Due:
The landlord can refuse to accept the repudiation of the lease by the tenant and do nothing to alter the relationship of landlord and tenant. The landlord can then insist on performance of the terms under the lease and sue for rent or damages on the basis that the lease remains in force.

2. Distress when rent has not been paid:
If the lease has not been terminated and the tenant owes rent, the landlord may seize the tenant’s goods at the leased premises and hold them as security for payment of the outstanding rent.

A landlord cannot distrain a tenants’ fixtures or improvements. A fixture is personal property that is attached to land or a building and is regarded as an irremovable part of the building.  A landlord can then sell the seized moveable property (chattels) and apply the proceeds of that sale to the outstanding rent.

A landlord must be careful not to commit an illegal distress. An illegal distress occurs when:
  1. there is no tenancy (if the possession is characterized as a mere license or other interest); 
  2. no rent is due; or 
  3. rent is due, but:
a. the landlord has terminated the lease;
b. the landlord or the bailiff break into the premises, or enter during a prohibited period;
c. exempt goods are seized, such as personal property of someone who is not the tenant;
d. the distress is made more than six months after the end of the term;
e. the landlord continues the distress after the tenant tenders the rent and costs of the distress; or
f. goods are seized off the premises when not permitted

When dealing with large items, a landlord should have a bailiff state that the goods are seized, secure and sell the property on the premises rather than removing them. If the tenant retakes them, then the landlord can recover damages and costs.

3. Re-entering and Terminating the Lease
The landlord will have terminated the lease if the landlord’s actions made it clear that the landlord had no intention of allowing the tenant to re-enter the premises again or to carry on with the lease unless the money owing was paid. Once a tenancy is terminated and the landlord has taken possession of the premises, the landlord is then only able to sue only for rent due or for damages for breaches of covenant committed before the date of termination.

4. Affirming the Lease and Re-letting the Premises
The landlord can refuse to accept the repudiation or abandonment of the lease, but advise the tenant that it will re-enter the premises and re-let the property “on the tenant’s behalf”. The landlord then holds the tenant liable for any deficiency in rental for the balance of the lease term.
This is foregoing is generalized information only and not legal advice for any particular set of facts.

For more information, please contact Peter Borszcz at PIHL Law Corporation:
Twitter: @pihllawcorp

Allowing the Buyer to Move In – Terminating an Existing Tenancy

Where there is an existing tenancy and your client wishes to move into the property, the existing tenancy will have to be terminated in accordance with the provisions of the Residential Tenancy Act.

For the new Buyer to move into the property the Seller must file a “Two Month Notice to End Tenancy”, Form RTB-32. The sequence of events is:
1. All Subjects must be removed first.
2. Buyer must request the Seller to serve notice in writing.
3. Seller then serves 60 day notice and must immediately pay 1 month rent as compensation.
4. Tenant may then give a 10 notice to move out without penalty.
5. Tenant may dispute note.

Time lines are important here and often get Realtors into trouble. Take into account all the notice period time lines when drafting dates. The 60 days applies only after after the “effective date of notice” [which means the day before rent is payable],

For Example
Notice on Oct 5th
Rent Payable on 1st
Effective Date Oct 31st
Move out Date Dec 31st!

Realtors should add the following language to the standard contract  of purchase and sale when terminating a rental agreement:

A. Upon Subject Removal, the Buyer hereby irrevocably instructs the Seller to terminate the tenancy on the Property.

B. Upon Subject Removal, the Seller shall serve the RTB-32 Form upon the Tenant and pay the Tenant compensation according the Residential Tenancy Act and regulations.

C. Within 48 hours of service of the RTB-32 Form, the Seller shall provide the Buyer with a copy.

Investors – Assuming a Tenancy

Investors are often looking to buy property which generates rental income. Many investment advisors see property as a key component of the financial portfolios for high net worth individuals.

Realtors should ensure that their investor clients have all the information they need to make a decision on a rental property. In addition to the considerations of resident buyers, investors need to know:
1. The Current Monthly Rent
2. Date Tenancy Commenced.
3. Due Date for Rent.
4. Date of Last Rental Increase.
5. Prepaid Amounts on Deposit.
6. Payment History with the Tenant.
7. Damage/ Complaint History with the Tenant.
8. Obtain a copy of the written tenancy agreement between the parties

When working with investors, the Realtor should add the following clauses to the standard contract of purchase and sale:

A. The Seller represents and warrants to the Buyer that the Residential Tenancy Agreement with ____[Tenant]_________ attached to this Contract is in good standing, and has not been modified or amended by the parties.

B.  The Seller represents and warrants to the Buyer that the rent roll for this property is as follows:
Current Monthly Rent:
Date Tenancy Commenced:
Due Date for Rent:
Date of Last Rental Increase:
Prepaid Amounts on Deposit:

Buying a Home with Existing Tenants

Buying a home with existing tenants involves a few additional obligations on buyers and sellers as 1) there is another party involved (the tenant), and 2) there are additional provincial laws that appy (the Residential Tenancy Act).

Prior to considering the purchase of a rental property buyers should ensure a) that the suite is a legal suite (as opposed to the commonly marketed “inlaw suite”) and b) that there are no strata bylaws which prohibit the rental.

If the new Buyer is planning to Move In to the Property:
**** Ensure the Tenant is given property notice to vacate – the notice can only be given a) once the Purchase Contract is subject free, and b) the tenant must have 60 days from day before the next rental payment date. This means, if rent is due on the 1st for a periodic monthly tenancy, and you give notice to the tenant on April 15th, the tenant does NOT have to move out until June 30 (60 days following April 30, the effective date of notice)

If the Tenant is staying resident on the Property
*** the Buyer should review the residential tenancy agreement to ensure that a) it is valid and enforceable and b) that the rent and damage deposit is properly adjusted on closing (note interest adjustment is required here under the Residential Tenancy Act)