Commercial Leases | Landlord & Tenant Law

This article will deal with a few issues that arise in Commercial Leases in Saskatchewan. I can assist a landlord or a tenant in various lease related issues, including the following:

• Drafting Leases
• Guarantees and Indemnities regarding Leases
• Lease Arrears
• Distress for Unpaid Rent
• Lease Termination
• Regaining of Possession by a Landlord
• Actions to enforce the Terms of a Lease
• Determining the extent of the Landlord's obligation to mitigate its losses when a landlord terminates a lease and takes possession or when a tenant abandons leased property before the end of the term.
• Tenant applications for Relief from Forfeiture

Residential Leases

If you have a question about a residential tenancy problem in Saskatchewan, I recommend that you first speak with the Saskatchewan Office of Residential Tenancies. They are a provincial government department that deals with landlord and tenants over these issues. They will be able to answer many of your questions without the necessity of a lawyer. If your questions cannot be answered by them, you may need to hire a lawyer. Keep in mind that the law regarding residential tenancies is quite different from normal landlord and tenant law. Here are a few examples.

• Residential tenancies are governed by The Residential Tenancies Act of Saskatchewan.
• There is a list of statutory conditions set out in the legislation that tenants and landlord are bound by. If a rental agreement is set out in writing as opposed to verbal, the list of statutory conditions must be attached to the agreement. Enforcement procedures that apply to commercial leases do not apply to residential properties.
• An order for possession, if rent is in arrears, must be obtained through the Rentalsman's Office.
• Distress for rent arrears (seizure of the tenant's goods) is not allowed.
• Prior to March 1 2007, a landlord could end a month to month tenancy by giving the tenant 1 month's advance written notice. The right of a landlord to terminate a month to month residential tenancy not in default is now much more limited (and 2 months advance notice instead of 1 for certain matters, if the right conditions exist) but the 1 month rule still applies to commercial month to month leases with no fixed term.

Drafting a Commercial Lease

If you are a landlord or a tenant planning on entering into a commercial lease, there are many issues that you need to consider. They are numerous and cannot be listed exhaustively here. Some of the more basic concerns include:

• Base rent and other rent payable
• Determing the occupancy costs or common area costs payable
• Obligations of the tenant such as the obligation to conduct regular maintenance and repairs
• Determining whether the landlord or tenant has the obligation to perform structural repairs
• Dealing with issues of rent abatement when property is damaged ... does the rent continue to fall due or not.
• Options to renew
• Any requirements regarding hours of operation
• Continuous operation clauses
• Exclusivity clauses dealing with competition
• Limiting the nature of business conducted from the premises
• Parking for employees and customers
• Access to the premises, including delivery access
• Mechanisms to resolve disputes between the landlord and tenant
• Assignment and subletting
• Guarantee, Indemnity Agreements or other security
• Security deposits
• Lease renewals

Lease in Default - Remedies of Landlord

If a lease is in default, there are a number of remedies available to a landlord, depending on the situation. They can include:

• Suing in court for arrears of rent and other money owing as it falls due.
• Distress proceedings against the property of a tenant, but not property belonging to others. The right to seize property and related rules are determined by a combination of provisions under The Landlord and Tenant Act plus the provisions of the lease document. Not all money owing under a lease is necessarily rent that qualifies for distress proceedings.
• Termination of a lease, serving notice of intent and then suing the tenant and any guarantors, etc for the arrears and any loss incurred by the early termination.
• Again the right to do so will be determined by a combination of provisions under The Landlord and Tenant Act plus the provisions of the lease document. In some cases, where the tenant's default involves a matter other than the failure to pay rent, a notice may first be required to be given to the tenant along with a reasonable period of time to remedy the default.
• Obtaining an order for possession from the Court of King's Bench where the tenant refuses to give up possession after termination.
• Re-letting the premises on account of the tenant and suing for the difference.

Lease in Default - Remedies of Tenant

If a landlord has terminated a lease because of a default by the tenant, the court has the discretion, but not the obligation, to reinstate the tenant upon terms that the court will determine. In order to do this, the tenant needs to make an application to the Court of King's Bench for an order for Relief from Forfeiture.

Distress Proceedings or Termination

This is an area where many landlords make costly mistakes. Distress and Termination are mutually exclusive remedies. If a landlord terminates a lease, the landlord is no longer entitled to distrain against the property of a tenant for arrears owing. If the landlord does so, the property must be released and the landlord might be liable in damages to the tenant.

Farm Leases

Farm leases need to deal with other issues not dealt with by commercial building leases. These additional concerns may include:

• Controlling the use of the property, which may include types of crops and summer fallow, obligations to apply chemicals, etc.
• Waterways, trees, gravel rights, etc.
• Determining the division of proceeds and input expenses in crop share leases
• Use and repair of buildings, fences and other improvements
• Grain storage at commencement and after termination of the lease
• Insurance issues such as crop insurance and hail insurance
• Government income support payments and subsidies

I would be pleased to assist you in dealing with any farm lease issues you may have.

Bankruptcy of a Tenant

Sometimes a tenant in financial difficulty will make an assignment in bankruptcy. It is also possible for creditors to petition (force) an insolvent person into bankruptcy. Bankruptcy will often bring about the termination of a lease. In that case, there may be disputes which are to a degree are dealt with under the Bankruptcy & Insolvency Act. If you are a landlord, tenant or unpaid creditor in this situation, you may require the assistance of a lawyer to deal with issues such as the following:

• The priority of a landlord as against other unsecured and secured creditors for rental arrears
• The ability of suppliers to take back goods recently delivered to a bankrupt tenant instead of losing them to the trustee
• The right of the trustee to temporarily occupy premises of a bankrupt

Bankruptcy should only be a last and final resort for a tenant in financial difficulty. This extreme measure should only be taken after obtaining specific legal advice. Bankruptcy can have many serious undesired side effects. For further information, see my article regarding bankruptcy.