Terminate Commercial Tenancy…Beware of the Pitfalls

I am lucky enough in my practice to handle a fair bit of commercial landlord/tenant disputes.  I find this work challenging and rewarding, primarily because my clients’ interests and needs are real and immediate.  Without fail, the most common problems I need to address are those of Landlords who want to terminate a tenant’s tenancy before the expiry of the lease term.  In this blog entry, I am going to discuss the non payment of Rent issue.  Non-rental breaches can trigger a right to terminate a tenancy but only if the lease is specific in that regard.  Further, the default notice required under a non rental default is significantly different than that required for a rental breach.

The risks associated with terminating a tenancy for non payment of rent are very real.  If you’re a landlord and are incorrect in your decision to terminate the problematic tenant’s tenancy you expose yourself to significant damages. You have essentially repudiated the lease and the tenant will be able to recover all business related losses.  Those losses could be significant.  As a result, before you decide to terminate the lease for non payment of rent you should consider the following:

1. Are the outstanding sums defined as “Rent” in the lease?
2. Have you accepted a tenant’s partial payment of rent for the month in dispute?
3. What are the notice of default requirements in your lease and have you complied with them?
4. Have you waived your right to terminate the tenancy by electing to “affirm” the lease?

The most subtle/significant pit fall of the items listed above, is whether you have inadvertently waived your right to terminate the tenancy by “affirming the lease”.  In plain English, electing to affirm the lease means that you have chosen to waive the tenant’s default by doing something inconsistent with your right to end the landlord/tenant relationship.  Acts such as, accepting partial payment of rent, continuing negotiations concerning repairs to the premises, communicating and negotiating new rental rates can all be viewed as acts that “affirm” the lease.  If you have in fact done any of these acts, then, depending on the specific facts of your case, you may have lost your right to terminate the tenancy for non-payment of rent.

Lesson Learned:  If you are decided that you want to terminate the tenant’s tenancy, make sure you give the appropriate default notice and be vigilant in making sure that you do not do anything that is inconsistent with your right to end the relationship.