This article reviews a number of recent Quebec court rulings on commercial leasing during the current pandemic. The latter can provide interesting tools for landlords or tenants currently affected by the closure of certain businesses, as recently decreed by the provincial government.
Last July, the Quebec Superior Court, in Hengyun International Investment Commerce Inc. vs. 9368-7614 Québec inc [1], had to rule on the following question: can a tenant be released from his obligation to pay rent because of the force majeure represented by the Covid-19 pandemic and the closure of businesses forced by government decree?
In this case, the tenant, who operated a fitness center, claimed that he did not have to pay rent for the months of March, April, May and June due to the forced closure of his business, which he considered an act of God. A notion that Catherine Demers has already discussed on our BloG. At the end of her analysis, she noted that the government decree and its consequences were a case of force majeure. Thus, the Court concluded that the tenant did not have to pay rent for the period covered by the forced closure of his business. She concludes this not because of the arguments put forward by the tenant, but because of the landlord’s obligation to provide peaceable enjoyment of the premises.
As the Court points out, this obligation, although it can be modulated contractually, is one of result. Applying the principle of article 1694 of the Civil Code of Québec, the Court stated that: since the landlord is released from his obligation to provide the tenant with peaceful enjoyment of the premises, due to an event of force majeure, the latter, in return, is not bound by his correlative obligation to pay the rent for this period.
With the closure of certain businesses once again ordered by the government, this decision offers a kind of guide for landlords and tenants regarding their respective obligations.
Earlier this month, the federal government announced that the Canadian Emergency Commercial Rental Assistance (CECRA) program would be extended once again, for the month of September. Requests for extensions can be made via the portal set up by October 30 at the latest.
Although applying to the AUCLC is entirely at the landlord’s discretion, refusing to join could have unfortunate consequences for a landlord faced with a tenant in payment difficulty. This could prove to be the case for some over the next few weeks, with the announcement of the forced closure of certain businesses by a new government decree.
On July 13, in Investissements immobiliers G. Lazzara inc. v.. 9224-5455 Québec inc. [2], the Superior Court had to rule on the landlord’s application for a safeguard order, seeking payment of unpaid rent, termination of the lease and eviction of the tenant.
In the months preceding the hearing, the tenant had suggested to his landlord that he apply for the AUCLC, which would have enabled the landlord to obtain payment of 75% of the rent for the period covered by the program, and the tenant to benefit from significant relief from his obligation. He would have had to pay only 25% of the rent for the same period. However, the landlord refused. Despite his difficulties, the tenant nevertheless undertook to pay 25% of the rent for the entire period covered by the AUCLC.
In its judgment, the Court recalled that the purpose of the safeguard order was to ensure balance between the parties. She added that by choosing to forego 75% of the rents and not benefiting from the AUCLC, the landlord placed himself in a disadvantageous position to ask the Tribunal to exercise its discretionary power to issue a safeguard order.
The Court therefore dismissed the application for a safeguard order and, although the landlord had refused to protect itself from the AUCLC, it allowed the tenant to pay only 25% of the rent for the period during which the AUCLC would be in force.
Although these judgments are the first to be handed down in this area, they serve as a reminder of the importance of balance in landlord-tenant relations, which is certainly accentuated in the context of a pandemic.
[1] Hengyun International Investment Commerce Inc. v. 9368-7614 Québec Inc, 2020 QCCS 2251.
[2] Investissements immobiliers G. Lazzara inc. v. 9224-5455 Québec inc. 2020 QCCS 2176.
