The court in FCP (BOPC) Ltd. v. Callian Capital Partners Inc. grappled with the difficult, yet recurring task of balancing commercial landlord and tenant rights in the context of the pandemic.
Summary of the Facts
In that case, FCP (BOPC) LTD., ARI FCP Holdings Inc. and CPPIB FCP Holding Inc. (the “Landlord”) applied to the court seeking to enforce the conditions of a Relief From Forfeiture Agreement (the “Agreement”) against Callian Capital Partners Inc. (the “Tenant”) and to terminate the lease between the parties due to the Tenant’s failure to pay rent under both the Agreement and the lease.
In March of 2020, the Tenant defaulted on payment of rent. The Landlord took steps to enforce the lease and take possession of the premises.
Negotiations between the parties resulted in the execution of the Agreement, wherein the Tenant was allowed to regain possession of the premises on certain conditions, including payment of rent and acceptance of the Landlord’s remedies in the event of any further default. The Tenant was represented by senior counsel in the process, and did not raise any objections regarding the provisions of the Agreement.
Despite its daily occupation of the premises, a court order requiring the Tenant to pay Occupation Rent, and the collection of Canada Emergency Rent Subsidy (“CERS”) payments, the Tenant refused to pay rent and was ultimately in arrears of rent in excess of $400,000.00. The Tenant took the position that the Landlord was prevented from evicting the Tenant given its CERS status, admitting it was always its intention to make this assertion once it regained possession of the premises.
In analyzing the specific facts of the case, the court appeared to have little sympathy for the Tenant. Stewart J stated, “[a]s sympathetic as I may be to an argument that a landlord ought to share in the consequences of the pandemic, such sympathy does not extend to the position of the Tenant on the facts of this case.” Citing Hudson’s Bay Company ULC v. Oxford Properties et al., the Stewart J highlights that “tenants cannot take matters into their own hands by unilaterally withholding rent”.
In upholding the terms of the Agreement, the court emphasized that the Agreement granted the Tenant conditional possession of the premises provided that the Tenant paid the scheduled rent installments. The Agreement also expressly protected the Landlord’s right of enforcement if the Tenant failed to make the scheduled rent installments and stated that the Landlord shall not be prejudiced by a stay of eviction based on the Tenant’s application for CERS. The court found that the facts did not demonstrate that the Tenant was truly coerced into entering into the Agreement, despite its desperation to repossess the premises. Stewart J concluded, “[u]ntil policy dictates that the consequences of the pandemic must be equally shared as between landlord and tenant, the terms of the lease must prevail.”
The decision in this case relies heavily on the specific facts before the court. It appears that the court quickly recognized the unfair behaviour on behalf of the Tenant, and therefore refused to extend any relief from its contractual obligations. Despite the obvious challenges brought on by the pandemic in the commercial leasing context, it appears that the court in this case hints that parties ought not to take advantage of efforts made to accommodate such challenges. As such, even if public policy required the parties to share responsibility for the consequences of the pandemic, perhaps that may not have changed Stewart J’s decision in this case.