As noted in our previous bulletin, "Ontario Government Proposes Temporary Moratorium on Evictions of Commercial Small Business Tenants", the Ontario government announced that it "intends to take action to protect commercial tenants from being locked out or having their assets seized by their landlords due to the negative impacts of COVID-19". Following this announcement, Bill 192, Protecting Small Business Act, 2020 was introduced by Steve Clark, Minister of Municipal Affairs and Housing, and received Royal Assent on June 18, 2020, officially amending the Commercial Tenancies Act.
The Protecting Small Business Act, 2020 prohibits certain actions by landlords if the landlord is or would be eligible to receive assistance under the Canada Emergency Commercial Rent Assistance ("CECRA") program for small businesses. For more information on CECRA, please see our earlier bulletin "CECRA: Applications for Canada Emergency Commercial Rent Assistance Program to Open at 8:00 a.m. EST on May 25, 2020".
Overview of the Legislation
The Protecting Small Business Act, 2020 temporarily halts or reverses evictions of commercial tenants during COVID-19 if the basis for eviction was due to arrears of rent and also provides protection to commercial tenants from being locked out or having their assets seized during COVID-19 due to arrears of rent.
Key provisions of the Protecting Small Business Act, 2020 are as follows:
- It only applies to a tenancy in respect of which the landlord is either: (i) eligible to receive assistance under CECRA, or (ii) eligible to receive assistance under CECRA if the landlord entered into a rent reduction agreement with the tenant containing a moratorium on eviction.
- A judge cannot order a writ of possession that is effective during the non-enforcement period (being June 18, 2020 and ending on the day the Act is repealed, being September 1, 2020, or on an earlier day to be named by proclamation of the Lieutenant Governor) in respect of a tenancy described above if the basis for ordering the writ is due to arrears of rent. This applies in respect of an action that was commenced before, on or after June 18, 2020.
- No landlord can exercise a right of re-entry during the non-enforcement period. If a landlord exercised a right of re-entry during the period that begins on May 1, 2020 and ends immediately before June 18, 2020, the landlord shall, as soon as reasonably possible: (i) restore possession of the premises to the tenant unless the tenant declines to accept possession; or (ii) if the landlord is unable to restore possession of the premises to the tenant for any reason other than the tenant declining to accept possession, compensate the tenant for all damages sustained by the tenant by reason of the inability to restore possession. If a landlord restores possession of a premises to a tenant in accordance with the foregoing, the tenancy is deemed to be reinstated on the same terms and conditions unless the landlord and the tenant agree otherwise.
- No landlord shall, during the non-enforcement period, seize any goods or chattels as a distress for arrears of rent.
- If, during the period that begins on May 1, 2020 and ends immediately before June 18, 2020, a landlord seized any goods or chattels as a distress for arrears of rent, the landlord shall, as soon as reasonably possible, return to the tenant all of the seized goods and chattels that are unsold as of June 18, 2020.
- A landlord who contravenes or fails to comply with the above is liable to the person aggrieved for any damages sustained by the person aggrieved as a result of the contravention or non-compliance. This applies in addition to any other remedy available by law to the person aggrieved.
Purpose of the Legislation
The Protecting Small Business Act, 2020, was introduced to ban evictions by commercial landlords who are not applying for the CECRA relief program despite their tenants being eligible for the program. This legislation is not a general moratorium on all evictions for commercial tenants in rent arrears as a result of the effects of COVID-19, only those who are eligible for the CECRA program, as the program relies on landlords applying on behalf of their eligible tenants. If landlords do not apply, struggling tenants are unable to receive the needed rental assistance. In essence, the moratorium on evictions was brought forward to provide further incentive for landlords to apply for rental relief under CECRA on behalf of their tenants.
Implications for Enforcement and the Rights of Landlords
While the Protecting Small Business Act, 2020 clearly limits the remedies normally available to commercial landlords, it does not expressly prevent all potential remedies. For example, if a landlord holds a deposit as security for a tenant's performance, it appears (for now) that the landlord will still have recourse to the deposit in accordance with the terms of the applicable lease. Depending on the terms on the lease, a landlord may also have recourse through an indemnity or guarantee.
Once the prohibitions set out in the Protecting Small Business Act, 2020 expire, the full range of rights and remedies will be available to landlords and tenants. This will add to the already significant backlog of cases that will need to be heard once courts reopen fully. As a consequence, landlords and tenants may encounter significant delays, once the prohibitions are lifted. This will have implications for both parties, but particularly for tenants seeking relief from forfeiture once landlords have the right to repossess property (subject to the terms of their particular lease). Such applications are normally considered urgent by the court, however, given that tenants will have a significant reprieve from eviction, courts may become more reticent to push such matters to the top of their busy court lists. At the same time, writs of possession may also take more time to obtain, and to be enforced. It will be important for both landlords and tenants to have a plan in place in advance of the expiry of the prohibitions established by the Protecting Small Business Act, 2020.
Please contact our national real estate team for any questions you may have regarding the new proposed legislation or in preparing applications for the CECRA program as noted in this bulletin.