Is COVID-19 a reason good enough for the tenants to ask for reduced rent or to stop paying? Is COVID-19 being a force majeure reason? These questions made it to the Courts in Quebec.
Yes, said the Courts. Hengyun International Investment Commerce Inc. c. 9368-7614 Québec inc., 2020. Investissements immobiliers G. Lazzara inc. c. 9224-5455 Québec inc. It’s force majeure (superior force). Not for the tenants, though. For the landlords.
Peaceful Enjoyment:
The Courts said many times that peaceful enjoyment of the leased property is in the core of the commercial lease contract. It is an obligation of result in the sense that a landlord must “deliver” premises suitable to be used according to the terms of the lease, not only “do his (her) best” to do so. In short, “no premises for activities stipulated in the contract — no payment.”
COVID-19 (and the Order in Council 2232020 where the Government of Québec suspended certain non-priority business activities) made, in this sense, impossible for many landlords to deliver “suitable” premises to their tenants. Because the relevant activities were prohibited there. Hence, the landlords are in default as they cannot provide what is promised in the contract. This default allows tenants to reduce their rent or even stop paying. Depending on the circumstances. The default itself caused by a force majeure, though. As it was beyond the landlords’ will and efforts to go against the government order.
Losses
What about the landlords’ losses then? The Civil Code of Quebec obliges everyone to do his (her) best to decrease (mitigate) any damage coming their way. Therefore, if a landlord did not carefully consider his (her) options under the Canada Emergency Commercial Rent Assistance program (CECRA), such a landlord cannot then go after his (her) tenants to cover the loss. The Canada Mortgage and Housing Corporation initiated CECRA response due to the COVID-19. It offered to landlords to pay half of the rent (for eligible time period) by way of a forgivable loan. Tenants had to pay a quarter of the rent. The remaining quarter of the rent should become a loss for landlords. Application for CECRA was not mandatory, though. Yet, in the Court’s view, if a landlord has not considered an opportunity to cover 75 percent of his loss, such a landlord cannot then ask for more than 25% of the rent from his (her) tenant.
