It may not sound common – but a commercial landlord owing a tenant money happens more often than you might think.

When this situation arises, many commercial leases don’t have clauses to clarify what happens.  Commercial lease agreements in Ontario often tilt in favor of landlords and these types of disputes have one major negative – tenants still must continue paying rent or be evicted, even when the landlord owes them money.  We believe this offers the Ontario government an opportunity to create more fairness in commercial lease agreements and help both parties resolve with a small change to the Commercial Tenancies Act.

The Core Issue

At the heart of this issue is the imbalance within the Ontario Commercial Tenancies Act. As it stands, landlords can re-enter and repossess premises if rent remains unpaid for fifteen days, regardless of any outstanding financial obligations they may have towards the tenant.  Even if they owe their tenant a million bucks, the tenant still has to pay their monthly rent. This creates a precarious situation for tenants, who, despite being owed money, must continue paying rent or face eviction.

Proposed Legislative Changes

The Better Way Alliance is proposing an amendment to Section 18(1) of the Ontario Commercial Tenancies Act. This amendment aims to introduce fairer tenant protections by:

  1. Introducing a Balance Offset Clause: This would allow landlords and tenants to agree to reduce the balance owed by the landlord through “free” rent, ensuring agreements are clearly documented.
  2. Mandatory Arbitration or Mediation: In disputes regarding withheld rent due to landlord obligations, a compulsory arbitration or mediation process would offer a streamlined, cost-effective resolution method.
  3. Protection from Eviction: Tenants would be shielded from eviction or legal action by landlords while dispute resolution is ongoing.

Rationale and Anticipated Benefits

This amendment is designed to correct the current imbalance, ensuring tenants are not penalized for withholding rent under circumstances where the landlord owes them money. It encourages landlords to fulfill their obligations promptly, fostering a more cooperative and fair approach to resolving financial disputes.

The benefits of this change are clear:

  • Reduction in Unfair Evictions: It decreases the risk of unfair evictions and financial strain on tenants.
  • Promotes Fair Resolutions: Encourages a cooperative approach to dispute resolution.
  • Strengthens Market Integrity: Enhances the overall fairness of Ontario’s commercial rental market.

As Ontario’s real estate environment evolves, so must our ability to ensure fairness in lease agreements that supports the longevity of our main streets.

Our proposed amendment to the Ontario Commercial Tenancies Act represents a critical step towards a more equitable commercial leasing system in Ontario. It acknowledges the complex nature of landlord-tenant relationships today and offers a pragmatic solution to an overlooked problem. By adopting these changes, Ontario can ensure that its commercial tenants have the protections they need, while providing landlords with an offset option that helps avoid a potential court case.