Landlord-tenant checklist for Quebec during COVID-19
Friday, April 03, 2020 @ 1:02 PM | By Laurent Debrun
If the lease contains a force majeure clause, how is the clause drafted? Is its ambit and scope wide, so as to cover any act of God or cases of force majeure or similar catch-all language encompassing an event over which the parties have no control, including a pandemic or government shutdown, or is it specific to certain events only (strike, fire, flood)?
Is the landlord or the tenant excused of all obligations under the force majeure clause as a result of the current situation or only some of them? Most commercial leases exclude the payments to be made by the tenant as excused, deferred, suspended or annulled despite an event of force majeure. This is seen as an allocation of risks by the parties and is valid, save in certain situations (i.e. the lease is a contract of adhesion).
Does the force majeure clause entitle the tenant to terminate the lease? Failing clear language, courts will not favour an interpretation entitling termination due to a one-or-two month shutdown. What if the shutdown lasts longer?
Does the force majeure clause permit the tenant to suspend rent payment during the force majeure event or, as is the case with such clauses in most commercial leases, the force majeure clause excludes the tenant’s right to defer the timely execution of his or her obligation to pay rent on time. In other words, force majeure or not, most leases call on the tenant to continue making payment of rent. Some leases will contain a provision, which may be part of the force majeure clause, entitling the tenant to an abatement of rent but mostly in cases where the building is damaged by fire or major damage.
If the commercial lease does not contain a force majeure clause, then it is in the Civil Code of Quebec (CCQ) that the rights and obligations of the landlord and tenant are enunciated (art. 1470, 1393 and ff).
There are two schools of thought concerning rent payment during a majeure event. Assuming a proven force majeure event as between the parties and their lease, the tenant may be excused from paying rent while the tenant is prevented from occupying the whole of the premises and receiving the full benefit of the landlord’s obligation to render the premises accessible. If the tenant is only partially prevented from benefiting from the leased premises, then his or her obligation to pay rent may be only partially extinguished, that is only to the extent of the deficit of use.
Another position is that force majeure forcing the landlord to shut down a building or preventing the tenant from operating a store should not excuse the tenant from continuing to pay rent because the landlord is not bound to an obligation of guarantee but only of result. Each case will revolve around its own facts, lease and circumstances.
Absent a force majeure clause, a tenant may not be permitted under the CCQ to terminate the lease if the leased premises are not available only for one, two or three months especially if the tenant is discharged, during that time, from his or her obligation to pay rent. What if, however, the business interruption lasts longer than two or three months? When does it entitle termination?
Does the lease contain a clause providing that in the event of a material adverse change or event, the parties agree to renegotiate part of the lease obligations? Landlords should monitor the situation: is the tenant and the public totally prevented from accessing the premises (i.e., they are closed and entirely not accessible)? The building or mall may be accessible, but the streets and malls are empty due to the strict instructions regarding confinement.
The tenant intending to denounce a case of force majeure while advising the landlord that he or she will not pay rent during this event would be well advised to seek professional advice as to the potential effect of such a decision on their rights under the lease. Again, in a most difficult situation such as the current one, constructive communications between landlord and tenant is highly recommended as it is guaranteed to yield the best result for both sides, both in the short and long term.
This is part one of a three-part series.
Laurent Debrun specializes in civil and commercial litigation, domestic and international arbitration, estate law, franchise law, aviation law, real estate law, intellectual property law and e-commerce law with Spiegel Sohmer. He has a vast experience in the optical industry and the representation of manufacturers in relation with their liability for consumer, industrial products and equipment.
Photo credit / Feodora Chiosea ISTOCKPHOTO.COM
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