When a landlord-tenant relationship is going well, it can be a relationship in which the two parties rarely see each other. However, if a dispute arises between a landlord and tenant, there is a risk of escalation as both parties attempt to protect what they consider theirs. For example, a tenant may withhold rent money while the landlord changes the locks or removes property from the rental unit to motivate the tenant to pay. However, if any of these actions are taken on a unilateral basis, it could form the basis of lengthy and costly litigation around debt collection.
A recent decision from the Alberta Court of Justice shows how escalation of a dispute can result in the matter coming before a court and also provides insight as to how a court might look to resolve outstanding debt collection matters.
Tenant leases landlord’s shop and yard space
In the matter of Pelley v. Streeper, the plaintiff and defendant by counterclaim (the “tenant”) was a commercial tenant who was in the business of buying, fixing and re-selling used vehicles. The defendant and plaintiff by counterclaim (the “landlord”) was a landlord who advertised that he had extra shop space and a yard he was looking to sublet.
The tenant started leasing a portion of the landlord’s shop and a portion of the surrounding yard in February 2021, using the shop to work on vehicles while other vehicles and trailers were parked in the yard of the premises.
Tenant stops making consistent payments after rent increase
When the parties agreed to the terms of the lease, the monthly rent amount was set at $1,000. However, it was agreed that this would increase to $1,500 in January 2022. In February 2022, the landlord reminded the tenant about this rent increase and sought to recover the outstanding $500 not paid in January. The tenant accepted this and paid the ongoing and retroactive amounts in late February 2022.
In late May 2022, the landlord moved the tenant’s vehicles with a front-end loader so that he could not access them. The keys to the vehicles were inside the shop, which the landlord had changed the locks to. Initially, the lock change was due to the landlord losing his keys. However, in the process, he decided to impound the tenant’s assets to motivate him to pay the back rent owed. He texted the tenant to tell him that if he paid up the rent, he would receive a new key. However, the landlord claimed that the tenant broke into the shop and caused damage.
Tenant sues landlord for damages; landlord counterclaims for unpaid rent
The tenant commenced a claim against the landlord for damages resulting from the wrongful seizure of five vehicles, two trailers, tools, supplies and other items as part of the termination of a verbal sub-lease agreement. Conversely, the landlord started a counterclaim against the tenant for unpaid rent totalling $3,200.00 and other damages.
When the matter came before the Court, there were three key issues to be determined:
- Was there outstanding rent owed as of May 2022?
- Was there a wrongful seizure of the tenant’s property?
- Did the tenant break into the shop causing damage, and if so, what was the value of the damage?
Was the landlord’s behaviour warranted?
There was no evidence of the discussion between the parties regarding the outstanding rent before the locks were changed, nor did it appear that the landlord told the tenant how much rent he owed. Although the landlord counterclaimed against the tenant for $3,200.00 in outstanding rent, he failed to provide documentation to support this amount.
The tenant told the Court that he was not late paying rent; rather, he had proactively paid rent for June and sought a refund. The tenant went on to note that he believed the landlord acted the way he did because of a rumour that the tenant was going to stop leasing the property, although the landlord denied that this was the case. Regardless, the Court found that rent was seldom paid on time during the fifteen months the tenant leased the shop. However, this may have been because rent was usually paid in cash when the parties saw each other, which did not always occur on the first day of each month.
The Court also found that the landlord’s actions made “little sense,” although they ultimately had the effect of ending the lease. The Court also noted that the landlord did not notify the tenant of the rent increase; however the tenant did not dispute the increase. As such, the Court concluded that the tenant was indebted to the landlord for an outstanding rent of $3,200.00.
Was the landlord entitled to seize the tenant’s vehicles?
The Court then turned to the issue of whether there was a wrongful seizure of vehicles. The tenant argued that the landlord’s actions were not supported by law and resulted in vehicle damages.
The Court found that the right of distress allows a landlord to seize a tenant’s property to cover unpaid rent and does not require judicial approval. At the same time, a landlord has a right to terminate a lease. However, a landlord does not have the right to pursue both avenues.
The Court noted that when the landlord terminated the lease due to him changing the locks, the landlord no longer had the right to seize any property, despite continuing to do so until trial. Therefore, the Court found that the tenant had the right to have his property since May 2022. Accordingly, the Court held that the landlord was indebted to the tenant for $26,000, the estimated value of the seized assets.
Facts surrounding break in are “sufficiently vague”
The Court finally turned to the issue of the alleged shop break-in. The landlord claimed that shortly after the termination of the tenancy, there were two forced entries into the shop. Despite reporting both incidents to the RCMP, the investigation neither resulted in charges nor the return of property. Following the first break and enter, security cameras were installed. Evidence showed that the tenant had broken a window to gain entry to the shop.
The landlord’s claim for the property-related damages amounted to approximately $7,300.00 to repair the side panels of the one-ton truck and to replace a battery. However, those repairs had not been undertaken, and it was unclear to the Court whether the repairs would occur. Further, the Court found that the facts surrounding the first break-in were “sufficiently vague,” and it could not find, on a balance of probabilities, that the damages occurred because of the tenant’s actions and the damages claimed were denied.
Court orders landlord to pay damages to tenant
Ultimately, the Court ordered the landlord to pay the tenant $26,000.00 less the $4,500.00 he was owed for outstanding rent and break-in damages, for a final amount of $21,500.00, with pre-judgment interest from May 25, 2022.
The Litigation Lawyers at DBH Law in Calgary Can Help You Resolve Your Commercial Real Estate Dispute
The skilled litigation lawyers at DBH Law can help you resolve disputes relating to debt collection, real estate matters, and commercial lease issues. If you have been unable to collect an outstanding debt, we will take quick action to trace and recover any funds owing to you. We understand the unique challenges faced by individuals and organizations when it comes to dispute resolution, which is why we work closely with every client to develop a tailored and cost-effective strategy to ensure your needs are met and you are positioned for the best possible outcome. To learn more about how we can assist you, contact us online or by phone at 403.252.9937 to schedule a confidential consultation with one of our lawyers.