When the Rent Stops Coming: What Can a Commercial Landlord Do in Ontario?

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Esmaeil Mehrabi /
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When the Rent Stops Coming: What Can a Commercial Landlord Do in Ontario?

When the Rent Stops Coming: What Can a Commercial Landlord Do in Ontario?

If you are a commercial landlord in Ontario and your tenant has stopped paying rent, you are not alone, and more importantly, you do have options. Non-payment of rent can cause serious disruptions to your business operations, particularly when mortgage payments, taxes, and maintenance obligations continue to accrue. In addition to default remedies under any lease agreement, Ontario law provides a number of remedies under the Commercial Tenancies Act (CTA) that landlords can use to protect their interests.

Step One: Review the Lease Agreement

Before taking any legal steps, review the terms of your lease. Most commercial leases will contain a clause outlining the consequences of non-payment, grace periods, and the landlord’s rights on default. However, even in the absence of a default provisions in a lease, the CTA grants landlords certain statutory rights.

Option 1¹ : Right of Re-Entry (Termination of Lease)

Under section 18(1) of the Commercial Tenancies Act, if rent is unpaid for 15 days, the landlord has the right to re-enter the premises and terminate the lease, provided there has been a clear default. This process is known as peaceable re-entry, and it must be executed carefully and without confrontation or breaching the peace. Any attempt to forcibly evict a tenant could expose the landlord to liability.

Option 2: Distress for Rent

Another remedy is distress, a self-help remedy preserved by the CTA that allows landlords to seize and sell a tenant’s assets located on the premises to cover arrears. However, this remedy is highly technical, and landlords must comply with specific procedures to avoid allegations of unlawful seizure or conversion by the tenant, suppliers or those who may have financed the tenant’s equipment.

Option 3: Suing for Arrears

Where termination or distress is not appropriate or desirable, landlords may sue the tenant in the Superior Court to recover outstanding rent. Keep in mind that even if the court awards judgment, enforcement (such as garnishment or writs of seizure and sale) is a separate process.

Option 4: Negotiated Settlement or Mediation

Litigation or re-entry may not always be the best route. In some circumstances, especially where the tenant’s business is temporarily struggling, a forbearance agreement, a temporary rent abatement, or a negotiated termination may lead to better long-term outcomes. The CTA does not preclude negotiated resolutions, and early dialogue could preserve a commercial relationship or facilitate a mutually beneficial resolution.

As a commercial landlord, you have several legal tools to address non-payment of rent. It’s crucial to take timely and well-informed action to mitigate losses while complying with the law. Always consider consulting a lawyer to ensure your approach aligns with both your lease terms and the Commercial Tenancies Act.

¹Termination and distress remedies are mutually exclusive which means a landlord has to either terminate the lease and sue for breach of contract or distress the tenant’s assets to recover unpaid rent.

Iranian tenant and landlord lawyer in Toronto