COVID-19: The Fallout For Commercial Landlords And Tenants

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The fallout from the coronavirus pandemic has created immediate and widespread problems for Landlords and Tenants. With non-essential businesses shut down indefinitely, many Tenants have not paid rent since March and are now asking their Landlords for extended waivers or deferrals. Of course, a Tenant that doesn’t pay rent is a problem for a Landlord struggling to pay its own bills, including its mortgage, property taxes and insurance.

There are various legal enforcement measures that a Landlord can take to enforce its rights against a defaulting Tenant. However, given the current economic climate, many Landlord’s are uncertain about the future prospects of finding new Tenants. Landlords don’t want to evict their current Tenants only to be left with an unoccupied space and no means of making up the lost revenue. When confronted with the prospect of a Tenant commencing litigation, Landlords are doubtful about whether Courts will look favourably on an eviction proceeding during a global crisis.

In Ontario, commercial Landlord’s have the option of applying for the recently introduced Ontario-Canada Commercial Rent Assistance Program. The Program requires Landlords to forgo any profits and reduce their rental income by at least 25% for three months.

Many Landlords want to help vulnerable Tenants such as independent restaurants that are experiencing extreme cashflow shortages and may not survive in the future socio-economic climate. However, and while many Tenants believe that the Commercial Rent Assistance Program doesn’t go far enough, many Landlords feel that Program places too much of the onus on Landlords and not enough on the Tenant. This is particularly so in circumstances where Tenants have been able to find ways to continue to operate their businesses and generate revenue during the pandemic.

In fact, many Tenants who are not in dire straits are asking their Landlords to make concessions. Companies such as FedEx, Gap, Canadian Tire and A&W Canada are all reported to be asking their Landlords for rent relief. In these cases, Landlords are understandably much less inclined to make meaningful concessions. After all, these are large companies with the financial wherewithal to meet their contractual obligation to pay rent for the space they occupy. It would appear, therefore, that some Tenants are acting opportunistically by using the current public health pandemic and sudden economic downturn to renegotiate their rental arrangements.

In light of the current stress on Landlord and Tenant relations, this is an ideal time to consult with a team of lawyers that have experience dealing with commercial lease disputes.