Default Under A Commercial Lease – Part One

By Alfred Kempf
Categories: Blog, Real Estate

A landlord’s reaction to a default under a commercial lease is usually determinative as to its ability to collect arrears and to recover future rent under the lease.

This first installment of this five-part series will set out some of the important questions that landlords will be asked in assessing an appropriate course of action. The questions are as follows:

1. What is the default alleged?

2. Is there a written lease?

3. Have you agreed to any oral or written modifications of the lease?

4. Have the applicable required notices been given under the lease?

5. Are there arrears of rent and other charges and if so how much?

6. Are you content to release the tenant from its obligations under the lease and take back the premises or do you want to enforce the lease in the sense that you want to hold the tenant responsible for future rent?

7. Have the premises been abandoned?

8. Has the tenant removed any of its personal property?

9. Are you aware of any creditors who might have priority or charges against the tenant assets?

10. How strong is the guarantee of the tenant’s obligations under the lease?

11. Do you have any intention to distrain (seize) the tenant’s personal property?

12. Have you used a bailiff in the past who is familiar with the premises?

13. Have you locked the tenant out of the premises without its consent (hopefully not).

14. Is the tenant in bankruptcy, has it made a proposal, or has it commenced a CCAA proceeding?

Proceeding too quickly may greatly prejudice a commercial landlord’s ability to collect arrears of rent or to preserve the ability to collect damages for future rent. If you are armed with the answers to the foregoing questions prior to seeking advice it will be easier for your lawyer to steer you in the right direction.

You may not know the answers to some of these questions but the more you know the quicker it will be for you to receive advice and take appropriate action.

In our next article we will discuss the pros and cons of termination of the lease and what constitutes termination.

Alf Kempf is the Chair of Pushor Mitchell’s Employment Law Group. He can be reached at 250-869-1215 or kempf@pushormitchell.com.

*Providing services through a law corporation