The Protecting Small Business Act, 2020 (the “Act”) received royal assent and took effect on June 18, 2020. The legislation prevents landlords who have not applied for Canada Emergency Commercial Rent Assistance (the “CECRA”) from evicting commercial tenants and from using most of their enforcement rights under the Commercial Tenancies Act. This legislation should encourage commercial landlords to apply for CECRA if they have not already done so.

This new Act:

• reverses and halts commercial tenant evictions, or seizures of tenant goods by landlords from the period of May 1, 2020 onwards, unless the landlord has already applied for CECRA;
• deems any lease the landlord had attempted to terminate or enforce from the period of May 1, 2020 onwards to still be in full force and effect on the same terms and conditions, and requires the landlord to take steps to return tenant assets or provide possession of the leased premises to the tenant once again or to pay damages to the tenant if the landlord is unable to return the tenant property or possession of the premises; and
• defines a non-enforcement period which commenced June 18, 2020 and will run until an act of Ontario Parliament repeals part of the Act. During this non-enforcement period:
  • landlords who have not applied for CECRA will not be allowed to terminate leases, distrain on tenant assets, or re-enter the premises; and
  • judges are prohibited from issuing writs of seizure if a landlord has not applied for CECRA and the reason for the application of the writ of seizure is non-payment of rent.

The Act is silent as to a landlord’s ability to apply any rent deposit it may hold against existing rent arrears, and it is also silent as to a landlord’s ability to pursue damages from any guarantor or indemnifier under a lease. It does, however, provide the most important protection to small business tenants struggling to make rent payments during the COVID-19 pandemic, and evidences the government’s focus on ensuring that landlords take advantage of the CECRA benefit being offered rather than evicting tenants who have been hard hit financially by the effects of COVID-19. Of course, there may be smaller commercial landlords who are equally as impacted by a rent reduction of 25% under CECRA.

Currently, landlords who apply and are approved for the CECRA benefit will receive the benefit for the months of June, July, and August 2020. At this time there is no indication that the benefit period will be extended. The Act will expire or be repealed on a date to be named by the Ontario government. For both landlords and tenants, it will be important that the duration that the CECRA is offered and the date the government chooses to repeal the Act are carefully correlated. Having a strategy in place to address returning to the normal provisions of a lease following the termination of the CECRA benefit and repeal of the Act will be imperative.

For any additional information on the new Act or the CECRA benefit and how it may affect you as a landlord or tenant, please contact one of the lawyers in our Business Law group.

Janice Mumberson and Cassandra Ironside