July 5, 2021
COVID-19 Does Not Excuse a Failure to Pay Rent
Courts will not rewrite leases by granting tenants rent abatements, despite the impact of the COVID-19 pandemic. That was the bottom line conclusion in Hudson’s Bay Company ULC v Oxford Properties et al, 2021 ONSC 4515. Deborah E. Palter and Alexander Soutter of TGF argued the case for the landlord.
In that case, HBC stopped paying rent to its landlords. When, seven months later, the landlords terminated the lease for failure to pay rent, HBC sought relief from forfeiture pursuant to s.20(1) of the Commercial Tenancies Act (Ontario) (the “CTA”). Further, HBC argued that the CTA entitled the Court to order a rent abatement in addition to reinstating the lease; HBC asked for 50%. The Court expressly rejected that proposition, and request, by finding:
…section 20 of the CTA cannot be expanded in meaning such that external circumstances (such as pandemics) will permit courts to override private contracts where one of the parties is no longer satisfied with the terms of the contract.
The Court also rejected HBC’s argument that the landlords were in breach of the lease. HBC alleged that the landlords failed to “provide a first-class shopping mall” because, among other things, the mall closed, or operated differently during COVID-19. The Court sided with the landlords, accepting that they could not ignore the laws requiring them to modify mall operations, and that making such a finding would “lead to a commercial absurdity”.
The Court granted relief from forfeiture on terms requiring HBC to pay all arrears of rent, in full, with interest.
The decision may yet be appealed, but is a powerful restatement of the principle that Courts will not use the COVID-19 pandemic as a tool to interfere in the bargains of sophisticated parties, and that landlords are not to be faulted for complying with the law. If you require assistance with commercial landlord-tenant matters, or other commercial litigation issues, we invite you to contact us.