Written by Michael Chow, Bonnie Anderson and Samantha Lush
On June 16, 2020, Bill 23, the Commercial Tenancies Protection Act (CTPA) passed First Reading in the Alberta Legislature. The CTPA proposes to prevent commercial landlords from evicting tenants or charging penalties if tenants have not paid rent in accordance with their respective commercial lease agreements due to the COVID-19 pandemic. The CTPA would retroactively come into force on March 17, 2020, and would apply to commercial lease agreements in effect during the period from March 17, 2020, through to August 31, 2020. It would not apply to an eviction or termination of a commercial lease agreement that had taken effect prior to the date of the first reading of Bill 23 being June 16, 2020.
Who Will the CTPA Apply to?
The CTPA will apply to landlords of a commercial premises or any party acting on behalf of landlords, such as a property manager, and to tenants who occupy commercial premises under a lease agreement or sublease agreement. It is expected that the Alberta Government will pass regulations clarifying the specific classes of landlords and tenants to which the CTPA will apply. Initial indications are that the CTPA will apply to the following classes of commercial landlords and tenants: (a) tenants that qualify for the Canada Emergency Commercial Rent Assistance (CECRA) program but their landlords have elected to not participate in CECRA; (ii) tenants that have had to close their business due to the COVID-19 pandemic; and (iii) tenants that have had their business revenues decline by 25 percent or more due to the COVID-19 pandemic.
What Will Be the Restrictions on Landlords?
The CPTA will restrict landlords, during the applicable period, from giving a notice of default, distraining for rent, evicting a tenant or otherwise exercising any remedies under or terminating a lease agreement due to the following circumstances which are caused by the COVID-19 pandemic:
- the non-payment by the tenant of any rent due under the lease agreement;
- the applicability of a force majeure clause within the lease agreement; or
- the breach of any continuous occupancy clause within the lease agreement.
Additionally, the CTPA will prohibit landlords from increasing rent under a lease agreement during the applicable period. If the landlord has charged a fee for late or non-payment of rent or has increased the rent payable in the applicable period, the landlord will be required to refund or credit that amount to the tenant.
These restrictions will not affect a landlord's right to evict a tenant or otherwise terminate a lease if the tenant has substantially breached its lease agreement for reasons other than as set out above. For instance, if the tenant commits significant damage to the premises, fails to maintain the premises, or becomes bankrupt, the landlord may, if it has the right to do so under the lease agreement, still evict a tenant for these reasons.
What Will Happen with Outstanding Rent?
The CTPA will not compel rent forgiveness or rent reduction. Instead, it will oblige landlords and tenants to enter into a payment plan for the full amount of rent owed. This payment plan would amend the lease and any breach of this payment plan by the tenant would permit the landlord to access all remedies available under the applicable lease agreement.
What's Next?
The CTPA is required to go through Second and Third Readings in the Alberta Legislature and receive Royal Assent before it will become law in the Province of Alberta. We will provide updates as they become available.
Please contact any lawyers of the Commercial Real Estate practice group in Calgary, Alberta with any questions or comments.
Bennett Jones