In a decision that continues to make headlines, a Quebec court excused a commercial tenant from paying rent for the period during which its business was closed due to the COVID-19 pandemic.
Commercial Tenant Asks for Rent Reduction Due to COVID-19
The tenant had occupied a space in the landlord’s commercial building in Montreal, Quebec since 2018. The tenant operated a gym on the premises.
However, the tenant had been forced by a Quebec government decree to close the gym as of March 24, 2020 due to the COVID-19 pandemic; under the decree, the tenant’s business was not considered an essential service and the tenant suspended its business operations.
As a result, among the many issues raised, the tenant claimed that it did not have to pay rent for the months of March to June 2020, based on the COVID-19 pandemic, the government decree, the commercial lease and its inability to run its business in the commercial space.
Legal Context: Force Majeure/Superior Force
The tenant argued that its inability to operate and, thus to generate revenue, was caused by superior force (force majeure) and that it should therefore be relieved of its obligation to pay rent for this period. The landlord disputed this claim.
What is called “superior force” in Quebec, is called “force majeure” in the rest of Canada.
Where a force majeure clause is included in a contract, it provides for the case in which an unforeseen event occurs, making it impossible for one or more parties to carry out their obligations under the contract. Such a clause is usually contemplated with respect to what are often referred to as “acts of God”, such as earthquakes or hurricanes.
In Quebec, superior force is defined in Art. 1470 of the Civil Code of Québec (the “CCQ”) as:
“1470. A person may free himself from his liability for injury caused to another by proving that the injury results from superior force, unless he has undertaken to make reparation for it.
Superior force is an unforeseeable and irresistible event, including external causes with the same characteristics.”
Additionally, the lease between the landlord and tenant specifically contemplated situations of superior force as follows:
Notwithstanding anything in this Lease to the contrary, if the Landlord or the Tenant is delayed or hindered in or prevented from the performance of any term, obligation or act required hereunder by reason of superior force, strikes, lockouts, labour troubles, riots, accidents, inability to procure materials, restrictive governmental rules, regulations or orders, bankruptcy of contractors, or any other event whether of the foregoing nature or not which is beyond the reasonable control of the Landlord or the Tenant, as the case may be, then the performance of such term or obligation or act is excused for the period of the delay, and the party so delayed shall be entitled to perform such term, obligation or act within the appropriate time period after the expiration of such delay, without being liable in damages to the other.
However, the provisions of this Section […] shall not operate to excuse the Tenant from the prompt payment of the Base Rent or Additional Rent or any other payments required by this Lease.”
Court Excuses Tenant from Payment of Rent
Instead of accepting the tenant’s argument that superior force had prevented it from fulfilling its obligation to pay rent, the court took the view that superior force had instead prevented the landlord from delivering the premises to the tenant, which excused the latter from its rent obligations. The court explained:
“In the Court’s view, it is the Landlord that was prevented by superior force from fulfilling its obligation to [the tenant] to provide it with peaceable enjoyment of the Premises. While it is true that [the tenant] still had access to the Premises, continued to store its equipment there and benefited, to some extent, from services, the Lease provides that the Premises are to be used “solely as a gym” and this activity was prohibited by virtue of the Decree. As a result, it is the Court’s view that [the tenant] had no peaceable enjoyment of the Premises during this period.
According to Article 1694 [of the] CCQ, a “debtor released by impossibility of performance may not exact performance of the correlative obligation of the creditor”. Consequently, while the Landlord was prevented by superior force from providing peaceable enjoyment, it could not insist that [the tenant] pay rent.”
Additionally, the court found that the lease provision relating to superior force did not apply in the circumstances because it contemplated situations in which performance of obligations had been delayed; in this case, the performance of the obligations had not been delayed, they had not been performed at all.
As a result, the court ordered that the tenant did not have to pay rent for the months of March to June 2020.
Entering in to a commercial lease represents a huge financial commitment and comes with significant legal risk. Because of this, it is critical for both landlords and tenants to obtain the advice of an experienced commercial leasing lawyer when negotiating a commercial lease and certainly before finalizing any agreement.
At DBH Law in Calgary, our experienced commercial real estate lawyers help our clients manage the risks of commercial leasing by providing trusted guidance in all aspects of their leasing affairs.
Contact the experienced commercial real estate team at DBH Law in Calgary to see how we can help you through your commercial leasing matters. We work with our clients every step of the way, negotiating for you and protecting your interests in the event of a dispute. Please reach out to us online or by phone at 403.252.9937 to talk today.