In his address to the nation on April 15, Prime Minister Trudeau said that the government would soon have more to say to businesses worried about commercial rent.

For many commercial landlords and tenants, whatever it is the Prime Minister will have to say cannot come soon enough. Since the latter half of March, businesses have been trying to come to an agreement with their landlords about whether and how they will pay their rent. With landlords unlikely to find anyone to take the place of a tenant who falls behind on the rent in an economic shutdown, the power may in some situations lie in the tenant’s hands, but in others, tenants may fear being locked out and evicted from premises in which they are heavily invested.

From what we have seen, many tenants and landlords remain willing to negotiate deals with one another. The following are examples of deals that may be possible when the relationship between landlord and tenant is positive and lines of communication are open:

• The tenant’s security deposit is used to pay rent for three months, with the understanding that the tenant will make best efforts to resume payment of rent after that time.
• A tenant may pay TMI (taxes, maintenance, and insurance, or only maintenance and insurance due to a current tax deferral) and CAM (common area maintenance) for one to two months, with the understanding that rent will resume after that time.
• The tenant may be permitted to pay reduced or no rent for the time being, with an agreement that the landlord will monitor the tenant’s financial statements to ensure that this rent is paid when cashflow resumes.

We recommend that both landlords and tenants take the long view in dealing with each other at this time. One may have the upper hand now, but that could change at any time. The key is for the exchange of emails or other communications to be written with a view to enforcement down the road.

By Jennie Brodski

Email:
Direct: (416) 342-5531