Canada: [Covid-19] The Government Of Quebec Announces Measures To Temporarily Prohibit The Termination Of Commercial Leases Due To Rental Defaults And Then Adjourns For The Summer
Real Estate Bulletin

The Minister of Economy and Innovation and the Minister Responsible for the Lanaudière Region Pierre Fitzgibbon announced on June 4, 2020 that he intends to support commercial tenants by temporarily prohibiting landlords from terminating commercial leases due to non-payment of rent. Minister Fitzgibbon stated that the measure will better protect retailers and help them focus on resuming their activities and that he is confident that landlords and tenants will succeed in coming to mutually acceptable agreements in support of Quebec's economic recovery.

Following this announcement, amendments to Bill 61, An Act to restart Quebec's economy and to mitigate the consequences of the public health emergency declared on 13 March 2020 because of the COVID-19 pandemic ("Bill 61") were submitted to the National Assembly on June 4, 2020. On June 12, 2020, the National Assembly was adjourned until September 15, 2020, without having passed Bill 61 in principle. As of the date of publication of this bulletin, neither Bill 61 nor the specific amendment thereto which is mentioned below are yet in force, and they may still undergo considerable changes before the Bill is sanctioned by the Lieutenant Governor.

Temporary ban on commercial lease terminations for rental default

One of the proposed amendments to Bill 61 prohibits the termination of a commercial lease for a non-payment of rent that has become due after March 13, 2020¹ (the "Amendment Adding Section 35.1 to Bill 61") between the sanction of Bill 61 and August 1, 2020, or any other date determined by the government before this date (the "Period of Validity").

During the Period of Validity, "property on the leased premises may not be seized and a prior notice of the exercise of a hypothecary right on this property may not be given to the lessee nor entered in the register of personal and movable real rights [...]."

It appears that the legislator intends to make the Amendment Adding Section 35.1 to Bill 61 a statute of public order, since "this section applies notwithstanding any inconsistent provision, including any provision in the lease." This prevents landlords, during the Period of Validity, from enforcing a non-payment clause that would otherwise allow them to terminate the lease if their tenant fails to pay the rent.

Lastly, the Amendment Adding Section 35.1 to Bill 61 sets out that it does not "prevent the parties from agreeing to terminate the lease." A landlord and tenant may therefore terminate the commercial lease by mutual agreement.

Impact on CECRA

The Amendment Adding Section 35.1 to Bill 61 may encourage landlords to apply for the Canada Emergency Commercial Rent Assistance program ("CECRA"). Though it is not mandatory to apply thereto, it is important to be mindful that each party to a commercial lease has a legal obligation to mitigate its damages.² As such, landlords who are eligible under CECRA guidelines and whose tenants are temporarily unable to pay rent during the Period of Validity may apply to CECRA in order to mitigate their damages by reducing their losses resulting from a rental default.

Contacts

Fasken's professionals are engaged to support you as the situation evolves.

Our Commercial Real Estate team would be happy to answer any questions you may have about this bulletin and the Amendment Adding Section 35.1 to Bill 61.

Footnotes

1. See full text of the Amendment Adding Section 35.1 to Bill 61 below. This text is current as of June 11, 2020:

[OUR TRANSLATION] "Section 35.1:

After section 35, insert the following section:

"35.1. A lease of an immovable property, other than a lease governed by articles 1892 to 2000 of the Civil Code or set out in the third paragraph of article 1892 of this Code, may not be terminated, the property on the leased premises may not be seized, and a prior notice of the exercise of a hypothecary right on this property may not be given to the lessee nor entered in the register of personal and movable real rights during the period starting on (insert date of sanction of this Bill) and ending on August 1, 2020, or any other date determined by the government before this date, for non-payment of rent under this lease that has become due after March 13, 2020.

This section applies notwithstanding any inconsistent provision, including any provision in the lease. It does not, however, prevent the parties from agreeing to terminate the lease."."

2. Section 1479 of the Civil Code of Quebec stipulates that: "A person who is bound to make reparation for an injury is not liable for any aggravation of the injury that the victim could have avoided."

Originally published 15 June, 2020.

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