What Rights Do Commercial Landlords Have When a Tenant Defaults?
Originally published on Slaw by litigator Matt Maurer.
The Ontario Superior Court of Justice has reaffirmed that when a commercial tenant fundamentally defaults on its lease, the landlord is entitled to treat the lease as ongoing and sue for rent, as it comes due, without any obligation to mitigate.
In the instant case, the tenant, Pet Valu Canada Inc., ceased paying rent to the landlord. The landlord did not terminate the lease and instead elected to sue for ongoing arrears of rent.
The landlord moved for partial summary judgment on the rent that had already accrued and was undisputedly owing at the date of the motion. The tenant tendered no evidence in response but rather took the position that partial summary judgment was not an efficient judicial means of dealing with claims for rent arrears in cases where the lease has not been terminated by the landlord. The tenant noted that it had not gone out of business, but rather had simply decided to stop operating from the specific location in question. As such, there was little doubt that the tenant could very well end up having to pay rent through to the duration of the term, notwithstanding that it was no longer operating from the property.
Justice Perell held that it was an appropriate case to grant partial summary judgment and ruled in the landlord’s favour. The decision is a worthwhile read for those interested in commercial leasing disputes as it sets out a comprehensive history of the law of landlord’s rights when a commercial lease goes into default.