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The Protecting Small Businesses Act, 2020 Complicates Commercial Lease Enforcement

3 minute read

On June 18, 2020, the Protecting Small Businesses Act, 2020 (the “PSBA”) became law in Ontario and amended the Commercial Tenancies Act (the “Act”) to suspend the ability of commercial landlords to evict or otherwise enforce commercial leases in some circumstances. The PSBA is part of the government of Ontario’s COVID-19 response, and kicks in if the Canada Emergency Commercial Rent Assistance for small business program (the “CECRA”) would have been available, but wasn’t used.

What does the Protecting Small Businesses Act do?

The PSBA suspends the enforcement of landlord’s rights under commercial leases during the “non-enforcement period”, which is the period from June 18, 2020 until (presumably) September 1, 2020.[1] It also makes landlords liable for enforcing commercial leases in some circumstances.[2]

How does the suspension of enforcement work?

The PSBA makes eviction orders for non payment of rent,[3] re-entry and termination of tenancies,[4] and the remedy of distress[5] ineffective during the non-enforcement period. If a landlord has already started some enforcement action before June 18 (after May 1), the tenancy is reinstated and the landlord must restore possession of the premises or compensate the tenant for damages.[6] If the landlord exercised the remedy of distress, the landlord must return any goods that have been seized and not already sold.[7]

Does the Protecting Small Businesses Act apply to everyone?

The suspension of the landlord’s enforcement rights apply if the landlord is eligible to receive assistance under the CECRA, or would have been eligible to receive assistance under the CECRA had the landlord entered into a rent reduction agreement containing a moratorium on eviction.[8] If the landlord was approved to receive assistance under the CECRA, the suspensions in the Act largely do not apply,[9] though the terms of the rent abatement agreement with the tenant (and the moratorium on eviction) would.

Key takeaway

Generally speaking, landlords should take special care before enforcing their rights under commercial leases until the PSBA and the amendments to the Act have been repealed. Landlords should take particular care with any tenant who (a) started business prior to March 1, 2020, (b) pays no more than $50,000.00 in gross rent each month, per location; (c) experienced a 70% reduction in revenues for April, May, or June; and (d) generated $20 million or less in gross annual revenues.[10]

[1] Act, s. 79; PSBA, s. 3(2). See also, “Explanatory Note” to the PSBA. The PSBA provides that the amendments may be repealed prior to September 1, 2020 by proclamation.

[2] Act, s. 86.

[3] Act, s. 81.

[4] Act, s. 82.

[5] Act, s. 84.

[6] Act, s. 83.

[7] Act, s. 85.

[8] Act, s. 80(1).

[9] Act, s. 80(2).

[10] Ibid.

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Mark H. Evans

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