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Summarizing the Commercial Tenancies Protection Act

23-Jun-20

by the McLennan Ross Corporate & Tax Team

(Bill 23 has not been passed yet but it will have retroactive effect, if passed)

On June 16, 2020, the Alberta government introduced the Commercial Tenancies Protection Act (the “Act”) via Bill 23. This Act seeks to “close the gaps” for commercial tenants whose landlords are choosing not to participate in the Canada Emergency Commercial Rent Assistance ("CECRA"). If this Act is passed, it will apply to all commercial tenancy agreements in effect at March 17, 2020 and to tenancy agreements that were entered into prior to March 17 but became effective between March 17, 2020 and June 17, 2020.[1] (if the government later chose to limit the types of landlords and tenants this act applies to you it has the power to do so. Currently there is no such limitation). 

The protections offered by the Act:

  1. From March 17, 2020 to August 31, 2020[2], landlords cannot give notice of default, distrain for rent, evict the tenant, exercise any remedies under a tenancy agreement or terminate the tenancy agreement IF the reason for doing so would be based on:
    • Non-payment of rent and/or rent arrears, if the lack of rent is caused by the COVID-19 pandemic and the circumstances were beyond the tenant’s control; or
    • Application of act of God or force majeure clauses, breach of continuous occupancy clause, or frustration of agreement if any of these are due to COVID-19 pandemic.
  2. If tenant cannot pay rent due to the COVID-19 pandemic, then landlord must enter into a payment plan with the tenant. Payment plan can extend beyond August 31, 2020 and must account for fees, penalties and/or rent.
  3. No late fees or penalties during March 17, 2020 to August 31, 2020 for late or non-payment of rent. If tenant has already paid a fee or penalty during this time period, then the landlord must refund or give credit.
  4. No rent increases during March 17, 2020 to August 31, 2020. Any renewals will also be subject to no rent increase during March 17, 2020 to August 31, 2020. Any rent increases already paid during March 17, 2020 to August 31, 2020 will be refunded or credited by the landlord.

The wording proposed in the Bill states that non-payment of rent must be due to COVID and circumstances beyond the tenant’s control. This may suggest that businesses that may legally open but choose not to may not be eligible for the protections offered by the Act. The Bill also does not specify who has the onus to prove a causal link between the breach and the COVID-19 pandemic.

Exceptions to protection:

  • Landlord can terminate agreement or evict if:
    1. The agreement allows for termination or eviction due to substantial breach; AND
    2. The substantial breach is one of the prescribed breaches (includes illegal acts, endangering other people, permitting destruction of leased property, tenant subject to any bankruptcy or insolvency procedures, etc.).
  • If the tenancy agreement was terminated or the tenant’s eviction was effective prior to June 16, 2020, then this Act does not apply.

Enforcement

Non-compliance will be treated like a substantial breach by the landlord under the tenancy agreement. Tenant can exercise all related remedies, plus any additional rights in the Regulations.

Only a Deferral

It should be noted that rent is simply deferred until August 31, 2020. The Act does not offer rent forgiveness or rent relief. However, as noted above, the tenant and landlord are obligated to enter into a payment plan for the rent. 

If you have concerns as either a tenant or landlord, the McLennan Ross Commercial Corporate Securities group would be happy to assist you. Please contact our office. 

 


[1] The Act allows the government the flexibility of limiting the application of the Act to only certain classes of landlords or tenants (through Regulations). No such limitation is currently proposed in the Bill.

[2] August 31, 2020 is currently the “Emergency End Date”. However, the government may extend the “Emergency End Date” further though Regulations.

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