New Relief for Landlords from Relief from Forfeiture

October 10, 2013

Relief from forfeiture, the right of the courts to set aside any landlord termination of the lease and to reinstate the evicted tenant to the leased premises, has long been an integral part of the Canadian commercial leasing scene. In Ontario, the Commercial Tenancies Act specifically grants tenants this remedy, and there is a general power to provide relief from forfeiture in the Courts of Justice Act. Courts can rely on either statute to allow tenants back into their leased premises after being evicted. This dual statutory authority is particularly useful to tenants in those limited circumstances under the Commercial Tenancies Act when relief for forfeiture is expressly not available (e.g. for wrongful assignment). In such cases, the court can simply switch to Courts of Justice Act relief from forfeiture, which is more general and not subject to any express limitations.

Thus, even if a landlord is successful in terminating the lease for cause and evicting the tenant, whether by self-help (changing the locks) or by judicial process (a court order for possession), a determined tenant can apply for a court order essentially reversing the eviction. Relief from forfeiture is a discretionary remedy which a court may grant if, given the conduct of the parties and the surrounding circumstances, the court considers it just and reasonable. 

The courts have always taken a very broad and generous view of what is just and reasonable. As a result, the relief from forfeiture case law has been almost overwhelmingly pro-tenant, allowing tenants back into their leased premises for a second chance, particularly when the defaults are capable of cure and the tenant shows some contrition and willingness not to commit the breach again. This is especially the case when the lease involves an active business, where the termination of the lease would put the tenant out of business, result in loss of good will and/or cause disruption to the employment of staff.

Even though a defaulting tenant will, more often than not, be successful in an application for relief from forfeiture after the eviction, many landlords still consider it better to proceed with the eviction for two reasons. First, it helps the landlord to establish a pattern of repeated evictions, which lessens the likelihood of future court orders granting relief from forfeiture. Second, by the time tenants are actually in default under their leases, they may not willing or able to mount the litigation necessary to get a relief from forfeiture court order.

About the only comfort that a landlord usually gets when relief from forfeiture is granted is that before the lease is reinstated, the court almost always orders the tenant to put the lease back into good standing and to pay the landlord for the costs incurred in the eviction and in the court proceedings involved in the relief from forfeiture. Although not appreciated by most landlords, the one other “benefit” that landlords get from the existence of a relief from forfeiture remedy is that it generally makes it difficult for tenants to obtain pre-emptive injunctions against eviction. Courts in Canada will not grant an injunction preventing an eviction unless the tenant can prove a risk of irreparable harm arising from the eviction. However, since tenants get relief from forfeiture so freely and so liberally, most courts conclude that tenants do not have a real risk of irreparable harm from being evicted.

A recent decision of the Ontario Superior Court of Justice, 7984987 Canada Inc. v. Lixo Investments Ltd., provides landlords with some relief from the dreaded doctrine of relief from forfeiture. This decision seems to make it a bit harder for some tenants, even first time offenders, to get relief from forfeiture after being evicted.

In the Lixo case, the tenant caused damage to the leased premises, made unauthorized leasehold improvements, was chronically late in the payment of rent, and failed to provide post-dated cheques as required under the lease. Ordinarily, even with this long list of defaults, a first-time defaulting tenant would expect to get relief from forfeiture from most courts.

However, in the Lixo case, after the landlord had changed the locks, the tenant, in retaliation, got another locksmith to change the locks yet again, in effect re-entering the premises by its own self-help remedy before getting a court order allowing it to do so. The tenant then went to court, some two months after regaining possession of the premises, seeking relief from forfeiture to legitimize its possession of the premises.

The court reacted very unfavourably to the tenant’s request for relief, seemingly annoyed by two factors. The first factor was the tenant’s form of “self-help,” which amounted, for all intents and purposes, to be a form of “pound breach” – forcibly breaking into private property to regain property allegedly wrongfully taken. The second factor was the tenant’s long delay in seeking relief from the court; the court did not accept the tenant’s explanation that the sole director was out of the country with no access to email. Ultimately, the court refused to grant the tenant relief from forfeiture, concluding that by taking matters into its own hands rather than turning to the courts, and then being unreasonably slow in seeking the assistance of the court, the tenant was no longer entitled to the court’s exercise of discretion.

While the Lixo case provides a glimmer of hope to landlords, it does not dramatically alter the law of relief from forfeiture in Canada. For the most part, tenants (especially first time offenders) will routinely get relief from forfeiture, almost as of right. However, the Lixo case does remind landlords and tenants that relief from forfeiture is a discretionary judicial remedy – there is no tenant self-help remedy. While landlords can evict by changing the locks, tenants cannot effect their own relief from forfeiture by re-changing the locks!

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