In response to the unprecedented economic challenges posed by the COVID-19 pandemic, governments worldwide implemented various measures to support struggling businesses and individuals. Canada’s federal and provincial authorities introduced programs aimed at providing relief, one of which was the Canada Emergency Commercial Rent Assistance (CECRA) program. Complementing this, Bill 192, known as the Protecting Small Business Act, 2020, came into force on June 18, 2020. This provincial legislation was designed to bolster the CECRA program by compelling eligible commercial landlords to participate, thereby safeguarding small business tenants from eviction during a critical period.
The Act employed a unique approach, often described as a “strong-arm” tactic. It effectively mandated that if a commercial landlord qualified for CECRA assistance but chose not to apply, they would be legally prohibited from evicting a tenant for non-payment of rent. This legislative intervention, while well-intentioned to provide a safety net for vulnerable small businesses, inadvertently created a landscape of considerable confusion and complexity within the commercial real estate sector. Many landlords and tenants had already forged private, mutually beneficial rent deferral or forgiveness agreements. The Act, in its sweeping nature, risked undermining these pre-existing arrangements, leading to uncertainty and, in some cases, encouraging tenants to potentially exploit the temporary eviction moratorium.
Initial uptake for the CECRA program was surprisingly low, not primarily due to uncooperative landlords, but rather because many landlords and tenants had proactively established private solutions tailored to their unique circumstances. These bespoke agreements often provided more flexibility and certainty than the government program. However, Bill 192 disrupted these “done deals,” reintroducing an element of instability and legal ambiguity. Understanding the precise implications of this Act became paramount for commercial property owners and their small business tenants. This article aims to clarify the critical components of the Protecting Small Business Act, 2020, offering a comprehensive guide for navigating its complexities, even as some of its finer points continued to be subject to interpretation.
Who Does the Eviction Moratorium Apply To? Unpacking the Specifics
Contrary to a common misconception, the “ban” on evictions under Bill 192 was not universal across all commercial tenancies. Its application was highly specific, targeting only those situations where the landlord met the qualification criteria for assistance under the CECRA program. This also included landlords who would have qualified for CECRA had they entered into a rent reduction agreement with their tenant that explicitly contained a suspension of evictions for the non-payment of April, May, and June rent. Therefore, if a landlord did not meet the CECRA eligibility requirements – for instance, if their property was not a commercial property, or if they did not experience the requisite revenue loss – then the eviction restrictions outlined in the Act would not apply to them. This crucial distinction highlights the government’s strategic intent to use the threat of eviction as an incentive for CECRA participation, rather than implementing a blanket eviction ban.
Navigating the Uncertainty: What if a Landlord’s CECRA Application Is Pending?
One of the most significant sources of confusion and frustration for commercial landlords revolved around the status of CECRA applications that were still awaiting government approval. The Protecting Small Business Act explicitly stated that the eviction moratorium would apply even if a landlord had submitted an application for CECRA but had not yet received official approval. This placed landlords in a precarious position, effectively preventing them from initiating eviction proceedings while their eligibility was being reviewed. The moratorium remained in effect for these landlords until their application was either approved or denied. It’s vital to clarify that the Act would not apply if the landlord had already been approved for CECRA and was participating, nor if they were deemed unqualified for the program from the outset. This provision meant that landlords caught in the application pipeline faced continued financial strain, unable to collect overdue rent or pursue eviction, even if the tenant failed to uphold their agreed-upon reduced payments under the prospective CECRA terms. This created a period of heightened vulnerability for property owners, underscoring the legal complexities of government intervention during a crisis.
Crucial Timelines: When Did the Moratorium Begin and End?
Understanding the precise duration of the eviction moratorium was essential for both landlords and tenants to plan their financial and legal strategies. The moratorium imposed by the Protecting Small Business Act officially commenced on June 18, 2020. This start date marked a significant shift in the legal landscape surrounding commercial tenancy agreements. The moratorium was designed to be temporary, concluding on the earlier of two potential dates: either the day the Act itself was repealed, or September 1, 2020. The inclusion of the “repeal” clause introduced a degree of flexibility for the government to adjust the legislation based on evolving economic conditions, although the September 1st date provided a clear, fixed endpoint if no earlier repeal occurred. This defined window, while offering short-term relief to tenants, also created a looming deadline for landlords, signaling an impending surge in legal actions once their rights to pursue rent arrears and evictions were fully restored. Strategic planning for the post-moratorium period became a critical consideration for all parties involved.
Key Restrictions: What Did the Act Prohibit for Qualified Landlords?
For landlords who qualified for the CECRA program but had not yet applied or secured approval, the Protecting Small Business Act imposed several significant restrictions on their ability to enforce lease terms and recover possession of their properties. These restrictions aimed to prevent evictions for non-payment of rent during the moratorium period, thereby encouraging CECRA participation. The specific prohibitions included:
- Ban on Writs of Possession for Rent Arrears: The Act prohibited landlords from obtaining a writ of possession that would be effective during the moratorium period if the underlying reason for seeking such a writ was an arrears of rent. This restriction was notably broad, applying to any action or application that had been initiated before, on, or after June 18, 2020. This meant that many legal proceedings already underway to recover property due to unpaid rent were effectively rendered invalid or paused by the Act, requiring landlords to halt their efforts and await the moratorium’s expiration.
- Prohibition on Exercising Right of Re-entry: During the moratorium, qualifying landlords were explicitly banned from exercising their contractual right of re-entry. This right typically allows a landlord to take back possession of leased premises when a tenant breaches a term of the lease. Crucially, this prohibition extended beyond just rent defaults; it applied to any and all defaults by the tenant. This meant that even if a tenant violated other significant terms of their lease agreement—such as operational covenants, maintenance obligations, or prohibited activities—the landlord was prevented from re-entering the premises during the moratorium period.
- Mandate to Restore Possession or Pay Damages for Prior Re-entry: A particularly impactful provision for landlords was the requirement to address re-entries that had occurred shortly before the Act came into force. If a landlord had exercised a right of re-entry between May 1 and June 17, 2020, they were legally obligated to, as soon as reasonably possible:
- Give the tenant back possession of the premises. While tenants retained the option to decline possession, the Act remained unclear about the protocol if the tenant had already abandoned the premises entirely, leaving landlords in a quandary regarding their obligation.
- Alternatively, if restoring possession was impossible for any reason other than the tenant’s refusal (e.g., the space had been re-leased), the landlord was mandated to reimburse the tenant for all damages incurred due to the inability to restore possession. The Act, however, did not provide clear guidelines on how these “damages” were to be calculated. This ambiguity created considerable uncertainty for landlords, raising questions about whether they needed to compensate tenants even if the premises had been abandoned, and what scope of damages (e.g., lost profits, relocation costs, sentimental value of lost business) might be included. Where possession was restored, the tenancy was legally deemed to be reinstated on the same terms and conditions as the original lease, unless new terms were mutually agreed upon.
- Return of Seized Goods for Prior Distress: Similar to the re-entry rules, if a landlord had seized any goods or chattels (personal property) between May 1 and June 17, 2020, as a form of distress for arrears of rent, they were required to return all unsold goods and chattels to the tenant as soon as possible after June 18. This “give back” rule also presented practical challenges, especially if the tenant had disappeared. The Act offered no clear guidance on how long a landlord would be obliged to hold onto such goods, or what measures they should take to locate a vanished tenant, leaving landlords with potential storage liabilities and legal uncertainties.
Post-CECRA Approval: Can You Still Evict if Your Tenant Defaults?
Once a landlord successfully applied for and was approved under the CECRA program, and entered into the requisite rent reduction agreement with their tenant, the restrictions imposed by Bill 192 largely ceased to apply to them. This distinction is crucial: the Act was designed to compel participation in CECRA, not to indefinitely suspend all landlord rights. Therefore, if a landlord was approved for CECRA and the tenant subsequently failed to pay the portion of rent they had agreed upon in the CECRA application or agreement, the landlord’s ability to pursue eviction for that specific default was restored. The aforementioned restrictions regarding writs of possession, rights of re-entry, and the return of seized goods did not extend to situations where the tenant breached their obligations under a duly executed CECRA agreement. This provided a pathway for landlords participating in the program to enforce the terms of the agreement and protect their financial interests, albeit within the framework of the CECRA program itself.
What Are the Repercussions of Disregarding These Restrictions?
Ignoring the provisions of the Protecting Small Business Act carried significant legal consequences for landlords. Any landlord who contravened or failed to comply with the mandated restrictions became liable to the “person aggrieved” for any damages sustained as a direct result of that contravention or non-compliance. This liability was explicitly stated to apply in addition to any other legal remedies that the aggrieved person might possess. This damages provision was particularly alarming and complex for landlords because the phrase “person aggrieved” is remarkably broad. It implies that a landlord’s liabilities could extend far beyond just the tenant to include any other individual or entity who could demonstrate they suffered harm due to the landlord’s non-compliance. For instance, this could potentially include a sub-tenant, a supplier, or even employees of the tenant who lost their jobs because of an unlawful eviction. This expansive interpretation of liability significantly heightened the financial and legal risks for landlords who might consider bypassing the Act’s requirements, underscoring the importance of strict adherence to the moratorium’s terms.
Superseding Established Precedents: The Act and Common Law Rights
One of the most powerful aspects of the Protecting Small Business Act was its declaration that its provisions would apply “despite any other part of the Commercial Tenancies Act (CTA) or any provision in an agreement or any common law rule.” This clause is a potent legal statement, signifying that the Act explicitly overrides existing commercial tenancy legislation, specific clauses within lease agreements, and established common law principles that traditionally govern landlord-tenant relationships. In essence, the Act created a temporary, paramount legal framework that took precedence over all other applicable laws and contracts during the moratorium period. For landlords, this meant that traditional remedies and rights they might have previously relied upon – such as the right to levy distress for rent, or to terminate a lease based on certain breaches – were temporarily suspended or altered by Bill 192. This legal supremacy underscored the government’s intent to provide immediate and unambiguous protection to small businesses during the pandemic, fundamentally reshaping the legal landscape for commercial leases.
Strategic Options for Landlords Who Qualify but Don’t Intend to Apply for CECRA
For landlords who qualified for CECRA but chose not to apply, whether due to existing private agreements, specific financial situations, or other strategic reasons, Bill 192 undoubtedly restricted their traditional landlord rights. However, this did not leave them entirely without recourse. Prudent landlords still had avenues to pursue within the bounds of their lease agreements and other legal frameworks. For instance, if the lease permitted, a landlord could utilize the security deposit held for the tenant to cover outstanding rent arrears. This would draw down the deposit, but it offered a immediate, albeit partial, solution for cash flow. Furthermore, landlords could engage in negotiations with indemnifiers or guarantors, if such parties were part of the lease agreement, to secure payment for the outstanding rent. While the moratorium prevented eviction for rent arrears, it generally did not absolve tenants or their guarantors of the financial obligation to pay rent. Exploring these contractual remedies became a vital strategy for landlords seeking to mitigate losses without contravening the Act’s eviction prohibitions. It also underscored the importance of comprehensive lease agreements that anticipate various scenarios.
Beyond the Eviction Ban: Other Critical Considerations for Landlords
Even if a landlord had successfully navigated the CECRA application process and received approval, thereby being exempt from the direct eviction ban for rent arrears, other important considerations remained. Participation in CECRA came with its own set of obligations and restrictions. Landlords were required to strictly abide by the terms of their CECRA agreements with their tenants. For example, a CECRA agreement might stipulate that a landlord could not terminate a tenancy for certain non-payment or non-operating covenants, even if those breaches were typically grounds for eviction outside the scope of Bill 192. It was therefore crucial for landlords to fully understand and adhere to their specific CECRA commitments. Moreover, for qualifying landlords who chose not to participate in the CECRA program, any eviction notices or other legal notices pertaining to defaults that were issued to tenants during the moratorium period were likely to be considered invalid. This meant that once the moratorium expired, such landlords would likely need to re-initiate the entire eviction process, sending new, valid notices, potentially causing further delays and administrative burdens. Careful record-keeping and legal consultation during this period were indispensable.
The Aftermath: What Happens Once the Moratorium Ends?
The expiration of the Protecting Small Business Act, whether by repeal or on September 1, 2020, marked a significant turning point. At this juncture, all the rights and remedies for landlords that were temporarily suspended or altered by the Act would be fully restored. This meant that landlords would once again be able to pursue writs of possession, exercise rights of re-entry, and enforce other lease terms without the restrictions imposed by Bill 192. However, while rights were restored, the practical landscape remained challenging. A key expectation was significant delays in the legal system. Courts had experienced closures and backlogs due to the pandemic, and the anticipated surge in commercial tenancy disputes post-moratorium was likely to exacerbate these delays. This meant that both landlords seeking writs of possession and tenants applying for relief from forfeiture would face extended waiting periods. Such delays would impact all parties, necessitating careful and strategic planning. Prudent landlords and tenants were advised to carefully assess their positions, consider amicable solutions, and prepare their documentation meticulously in anticipation of a slow judicial process, making clear communication and potential settlement discussions more valuable than ever.
Given the potential for friction and heightened tension that the Protecting Small Business Act may have inadvertently fostered between commercial landlords and their small business tenants, the most effective long-term approach to navigating this crisis remained honest, transparent, and collaborative engagement. The interconnectedness of their success is undeniable: a thriving small business tenant is a reliable income source for a landlord, and a supportive landlord provides the stability a small business needs to survive and grow. By working together, understanding each other’s challenges, and seeking mutually beneficial solutions, both parties stood a better chance of weathering the economic storm and fostering sustainable business relationships beyond the temporary legislative interventions. Ultimately, good faith and cooperation were the strongest tools in building resilience for the commercial real estate sector.