If you’re in default of your Ontario commercial lease agreement and your landlord is trying to evict you, you may be able to preserve your lease agreement and stop the eviction by bringing an application to the courts for relief from forfeiture.

If you need legal advice from an Ontario commercial lease lawyer, book your free legal consultation with Supply Law today.

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*Disclaimer: this guide is for informational purposes only. It does not constitute legal advice nor create a solicitor-client relationship between the author and reader. As with all legal matters, a lawyer should be properly retained and consulted where legal advice may reasonably be considered necessary.

This blog post will cover the basics of relief from forfeiture for Ontario commercial lease agreements including:

1. What is relief from forfeiture?
2. When can a commercial tenant apply for relief?
3. When will relief be unavailable?

1. What is Relief From Forfeiture?

An equitable remedy based on fairness

Relief from forfeiture originated as an equitable remedy. Historically, it allowed individuals to ask special courts to intervene where some manifest unfairness would result from a strict enforcement of the law. Relief was typically available where enforcing the rights of an opposing party to a contract would result in the party requesting relief suffering harm disproportionate to the damages caused by their breach.

Relief under the Ontario Courts of Justice Act

Relief from forfeiture has since been codified in statutes throughout Canada. In Ontario, the most prominent and wide reaching can be found in Section 98 of the Courts of Justice Act which very generally provides:

“A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.”

As forfeiture means the loss of money or right, Section 98 allows Ontarians to apply to the courts for relief in a wide variety of situations where a monetary or property interest is at risk of being lost.

Relief under the Ontario Commercial Tenancies Act

Relief from forfeiture is a remedy also specifically provided in Section 20 of the Ontario Commercial Tenancies Act. Section 20 provides that a tenant may apply to the court for relief and the court may grant such relief as it considers just:

“…having regard to the proceeding and conduct of the parties and to all the other circumstances, the court thinks fit, and on such terms as to payment of rent, costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future…”

Parties to a commercial lease agreement in Ontario cannot contract out of this section of the Commercial Tenancies Act. A clause in a commercial lease agreement preventing a tenant from applying for relief from forfeiture would be void and unenforceable. While the ability of a tenant to bring an application for relief is a statutory entitlement, relief itself is not a right. Whether or not this remedy will be granted is entirely up to the courts.

2. When Can a Commercial Tenant Apply For Relief From Relief?

Despite relief from forfeiture being available to all commercial tenants in Ontario, the courts will usually be reluctant to grant relief. When bringing an application, the party seeking relief “bears the onus” (is responsible for) proving to the court why their request should be granted.

Factors the Court will Consider

In considering whether it would be fair to allow the eviction to proceed, the court will consider factors such as:

  • the history between the parties to the commercial lease agreement
  • any prior breaches of the lease agreement by the commercial tenant and the severity of those breaches
  • whether the tenant was acting reasonably in the circumstances
  • whether the parties were acting in good faith
  • whether the landlord’s termination or eviction was primarily about securing the payment of money, and
  • the value of the property being forfeited compared to the damage caused by the breach

It is usually a requirement that the tenant rectify the default giving rise to the landlord’s termination as a condition of preserving the lease. Because of this, relief proceedings can provide an opportunity to have a judge clarify the parties’ obligations under the lease such as where the parties are in disagreement over who is responsible for a repair.

Relief and Non-Payment of Rent

Where non-payment of rent is the obligation the tenant has breached under the lease, a tenant will generally only be able to apply for relief where the following conditions are met:

  • the tenant applies for relief with “clean hands” (meaning the tenant hasn’t committed some other unlawful act like forcefully re-entering the premises after termination to retake possession)
  • the tenant has not refused to pay the rent outright
  • the rent has only been in arrears for a short time, and
  • the landlord has not suffered serious loss caused by the delay in paying rent (such as excessive accumulation of mortgage debt or property taxes)

Usually, where the tenant rectifies the breach by paying the overdue rent, the courts will grant an order for relief and possession in favour of the tenant. The typical situation in which relief will be granted for non-payment of rent is where an overzealous landlord, often with ulterior motives (such as wanting to re-let the premises at a higher market rent) jumps on the tenant’s failure to pay rent on time as grounds to terminate the lease.

3. When Will Relief be Unavailable?

There are specific instances where relief will not be available under the Ontario Commercial Tenancies Act. These include:

  • where the eviction is regarding the tenant’s breach of a covenant to maintain a valid insurance policy for the premises and at the time of the application there is no policy in place.
  • where the tenant covenants not to assign the lease and breaches the lease by doing so anyways.
  • where the lease specifies the tenant will forfeit the premises on bankruptcy and the tenant is insolvent

In addition, it has been held in the past that relief does not apply to a tenant that failed to strictly comply with requirements for renewing their lease, though recent case law tends to suggest otherwise (in these situations it may be better to rely on other equitable remedies such as promissory estoppel or waiver depending on the facts). The courts have consistently held that where the landlord provides notice of its intention to terminate the lease on expiry of the term, the tenant cannot rely on relief from forfeiture to prevent the landlord from exercising those rights. In essence, relief generally should be available only where the termination is a result of the tenant’s default and not as a result of the landlord independently exercising its rights.

Conclusion

In certain situations, where the Ontario Commercial Tenancies Act does not protect a tenant, the general application of Section 98 of the Courts of Justice Act may still be relied on as grounds for relief. Due to the availability of commercial tenants to bring an application for relief from forfeiture (in a wide variety of situations) tenants and landlords to a commercial lease agreement in Ontario should both be aware of this remedy and when it is likely the the court will grant relief and stop a commercial eviction.

If you need legal advice from an Ontario commercial lease lawyer, book your free legal consultation with Supply Law today.

Book Now