Protecting Small Business Act: Commercial Evictions Paused in Ontario
Canada’s most populated province now joins the ranks of Alberta, British Columbia, Nova Scotia and Quebec in announcing a commercial eviction ban, though policies in different provinces vary in execution and timelines.
The Ontario government announced on June 17th that it is taking additional measures to protect commercial tenants from being locked out or having their assets seized by their landlords due to the negative impacts of COVID-19.
Premier Doug Ford announced his government is introducing legislation to temporarily ban commercial evictions of businesses that are eligible for the combined federal and provincial rent assistance program, by making changes to the Commercial Tenancies Act. The temporary ban will help small business owners who are struggling to pay their rent amid the COVID-19 fallout.
Pause on Commercial Evictions
The Ontario government passed the Protecting Small Business Act, temporarily halting or reversing evictions of commercial tenants and protecting them from being locked out or having their assets seized during COVID-19.
The legislation applies to businesses that are eligible for the combined federal and provincial rent assistance for evictions, from May 01, 2020 until August 31, 2020. The new policy would also reverse any evictions that happened on or after June 3rd and make it illegal to evict a CECRA-qualifying tenant in Ontario until August 31st.
During the non-enforcement period landlords are also prohibited from exercising a re-entry right, and if a landlord exercised a right of re-entry on or after May 1, 2020, possession must be returned to the tenant. If possession can’t be returned to the tenant, the landlord must compensate the tenant for all damages sustained by the tenant by reason of the inability to restore possession.
Landlords are also prohibited from seizing any goods or chattels as a distress for arrears of rent, and if the landlord seized any goods or chattels as distress for arrears of rent on or after May 1, 2020, any unsold goods and chattels must be returned to the tenant.
Any landlord who fails to comply with these requirements is liable to the tenant for any damages sustained by the person as a result of the contravention or non-compliance.
It is important to remember that these restrictions apply to:
1) Landlords eligible to receive assistance under the Canada Emergency Commercial Rent Assistance for small business program (the “CECRA”); and
2) Landlords who would be eligible to receive assistance under the CECRA, if the landlord entered into a rent reduction agreement with the tenant containing a moratorium on eviction.
Other commercial tenancy arrangements remain unaffected.
The legislation also does not apply to landlords approved to receive the CECRA because in those cases the landlord and tenant relationship would instead be governed by the rent reduction agreement and the terms of the CECRA program.
Canada Emergency Commercial Rent Assistance (CECRA)
The federal government announced CECRA in late April to help small businesses with one of their biggest costs. The pause on evictions does not apply to those participating in the CECRA program for small businesses, as the program requires landlords to enter into a rent reduction agreement with their impacted small business tenants and commits them to a moratorium on evictions for three months.
To be eligible under CECRA, small businesses must have experienced
- At least a 70% decline in revenue because of the pandemic;
- Pay less than $50,000 in monthly rent; and
- Have less than $20 million in gross annual revenue
CECRA for small businesses provides forgivable loans to eligible commercial landlords for the months of April, May, and June 2020.
- Small business landlords would be asked to forgive at least 25% of the tenant’s total rent;
- Tenants would be asked to pay up to 25% of rent; and
- The provincial and federal governments would share the cost of the remaining 50%
Tenants and landlords can learn who is eligible and how to apply at https://www.ontario.ca/page/covid-19-rent-assistance-small-businesses. The application deadline is August 31, 2020. Please see our article on how to apply for CECRA.
COVID-19 has created an ever-changing legal landscape and it continues to have a significant impact on many aspects of our lives. The restrictions discussed above are subject to change, perhaps with very little notice. Whether as a landlord or tenant, if you have any questions with respect to your commercial lease arrangements, please reach out to our corporate and commercial team at Kalfa Law and we would be more than happy to provide you with legal advice pertaining to your specific situation.
Baber Rahim, Tax Law Clerk & JD Candidate
© Kalfa Law, 2020
The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.