By Graeme Swainson and Christopher Young

On June 16, 2020, the Alberta Legislature heard the first reading of Bill 23, aimed at providing relief for commercial tenants struggling due to the COVID-19 crisis.  The following are some short questions and answers based on the version Bill 23 as presented at the first reading.

Q: Is Bill 23 in force?

A: Not yet.  At present, Bill 23 has been given first reading, but has not yet been debated or passed through the Legislature.  As such, it is still subject to the potential for amendment.  If passed in its present form, the majority of the bill will retroactively come into force as of March 17, 2020. 

Q: What will Bill 23 do?  

A: Bill 23, if passed, will become an Act titled the Commercial Tenancies Protection Act (“the Act”).  The Act will prohibit commercial landlords (the definition of which includes owners, sublandlords, property managers or anyone else who otherwise attempts to enforce the rights of a landlord under a tenancy agreement) from evicting or otherwise taking steps to evict eligible tenants that have been affected by the COVID-19 pandemic.  Furthermore, landlords will be required by the Act to enter into payment plans with tenants unable to pay rent due to the COVID-19 pandemic. 

Q: Will the Act require a landlord to reduce rent similar to Canada Emergency Commercial Rent Assistance?

A: No.  Although landlords will be required by the Act to work with struggling tenants, there are no requirements within Bill 23 or the proposed Act for a landlord to reduce a tenant’s rent.

Q: What will a commercial landlord be prohibited from doing under the Act?

A: Commercial landlords will be prohibited from providing tenants with a notice of default, distraining for rent, evicting a tenant, or otherwise exercising remedies under or terminating a tenancy agreement during the period beginning on March 17, 2020 and ending on the emergency end date (being August 31, 2020 unless changed by the regulations), in relation to (emphasis added):

a) the non-payment of any rent, rent arrears or both by a tenant due to circumstances beyond the tenant’s control caused by the COVID-19 pandemic,

b) the applicability of an act of God or force majeure provision of a tenancy agreement or frustration of contract caused by the COVID-19 pandemic, or

c) the breach of any continuous occupancy clause of a tenancy agreement caused by the COVID-19 pandemic.

During this period, there are also prohibitions on rent increases as well as fees/penalties for late payment or non-payment of rent.  The prohibitions would not apply to evictions or lease terminations that happened before the legislation was tabled on June 16, 2020.

Q: Will all tenants be protected by the Act?

A: No.  The regulations, which have not been released yet, will define eligible tenants.  However, according to the Province’s website, the protections would apply to tenants who have experienced at least a 25% decline in revenue as a result of the COVID-19 pandemic.  Furthermore, the Act will only apply to commercial tenancy agreements effective March 17, 2020, or which were entered into before March 17, 2020 and became effective between March 17, 2020 and the end of the Province’s public health emergency.  Of note, the Province announced on June 16, 2020 (the same day Bill 23 was tabled) that the public health emergency in Alberta would be ending.

Q: What does “caused by the COVID-19 pandemic” mean?  

A: At this time it is unknown how broad the term will be applied and how much scrutiny tenants will face who seek the protection of the Act.  However, as Bill 23 is being publicly referred to by the provincial government as relief for commercial tenants, it seems like any tenant that has experienced a decrease in revenue in excess of 25% may likely be given the benefit of the doubt.

Q: Are all evictions prohibited?  

A: No.  Landlords will still able to evict tenants for the following substantial breaches (should the applicable lease agreement allow):

a) the tenant interfering in any significant manner with the rights of either the landlord or other tenants in the premises, the common areas or the property of which they form a part;

b) the tenant performing illegal acts or carrying on an illegal trade, business or occupation in the premises, the common areas or the property of which they form a part;

c) the tenant endangering persons or property in the premises, the common areas or the property of which they form a part;

d) the tenant doing or permitting significant damage to the premises, the common areas or the property of which they form a part;

e) the tenant failing to maintain the premises and any property rented with it in a reasonably clean condition;

f) the tenant failing to vacate the premises at the expiration of the tenancy, if the expiration is unrelated to a matter identified in subsection (1)(a), (b) or (c) of the Act;

g) the tenant repudiating the tenancy agreement by abandoning the premises without notifying the landlord of any intent to reoccupy, assign or sublease the property;

h) the tenant making any bulk sale or becoming bankrupt or insolvent or taking the benefit of any Act in force for bankrupt or insolvent debtors;

i) the tenant receiving from any of its secured creditors a notice under the Bankruptcy and Insolvency Act (Canada) advising the tenant that the secured creditor intends to realize on security located at the leased commercial premises; 

j) if the tenant is a corporation, any order being made for the winding-up of the tenant or other termination of the corporate existence of the tenant.

Q: What are the requirements of the payment plan?

A: Further to the prohibition on evictions, rent increases, and fees/penalties, the proposed Act states that landlords are required to enter into payment plans with tenants who are unable to pay rent due to the COVID-19 pandemic.  The payment plan may extend beyond the emergency end date and must account for any payments made by the tenant that are prohibited by the Act.  However, while each situation will be unique, the proposed Act does not appear to provide further guidance as to what type of plan would be reasonable or appropriate in any particular circumstance.

Q: What remedies are available to tenants if the protections afforded under the Act are not complied with by their landlord?

A: The proposed Act includes a provision which specifies that non-compliance with its provisions shall be considered a substantial breach of the tenancy agreement by the landlord, and confirming that the tenant shall be entitled to exercise all rights of the tenant relating to a substantial breach set out in the tenancy agreement.  Accordingly, failure of a landlord to comply with the Act may potentially provide a tenant with termination or other rights depending on the provisions of the specific lease in question. It further appears that future regulations are intended to be established which may provide further clarity regarding consequences and remedies for non-compliance with the Act, but the details of such intended regulations are not yet known.  Once the Act becomes law, tenants may ultimately seek the protection of the courts, who may grant remedies such as damages (which might include repayment of remuneration paid to the landlord by the tenant which was prohibited by the Act or monetary amounts awarded for other losses resulting from a breach of the Act) or injunctive relief (such as to stay evictions prohibited by the Act or potentially to require the landlord to enter into a payment plan as required by the Act).

Questions?

If you have any further questions about Bill 23 or dealing with tenants during the COVID-19 crisis, we invite you to reach out to one of the members of the Brownlee LLP real estate group to discuss.