Since the beginning of the pandemic, Quebec courts have been very cautious when interpreting government directives related to COVID-19 (Orders).
Faced with frequent applications for safeguard orders to determine the obligation to pay rent, few judges (if any) have been willing to stick their necks out to determine whether the Orders in Council constitute a disturbance of the law or a force majeure, deferring that task to the judge hearing each case on its merits.
The Tremblay vs. Soutex is the most recent example.
In a decision rendered by the Court of Quebec, the Court ruled on a request for a safeguard order submitted by Cominar Real Estate Investment Trust (Cominar) insisting that its tenant, Soutex Inc. (Soutex), a mineral processing and metallurgical consulting firm, pay the rent for March 2021, as well as all future rents until final judgement.
In its defence Soutex argued that, under the Orders, the directives in force prevented Cominar from full and peaceful enjoyment of the leased premises, contrary to the obligations set out in the lease and the applicable provisions of the Quebec Civil Code.
In this case, the lease stipulated that use of the premises was reserved solely for "an engineering consultancy in mineral processing and metallurgy". However, given that Soutex does not offer priority services, it ceased its professional activities in the leased premises as of March 25, 2020. This interruption was intermittent, depending on the various measures (Orders) adopted during the pandemic.
In its analysis of the applicable criteria, the Court noted that under the terms of the lease Soutex waived its right to withhold payment of rent in the event that the landlord failed to meet his own obligations. That type of clause gives the commercial lessor a clear right to full payment of rent.
As for the serious prejudice alleged by Cominar, the Court recognized that accumulating arrears and ongoing operating costs are hard on a landlord. During the period in question the commercial space was left at the disposal of Soutex, which made use of it to store its personal property. However, the Court noted that Soutex is unable to exercise its professional activities in the rented premises, and for that reason concluded that it could not insist that Soutex pay the full amount of the rent due.
Given the exceptional circumstances, and with an eye on restoring a balance between the two parties, the Court ruled that Soutex is obliged to pay only 65% of the monthly rent as of April 1, 2021, and limited the duration of the safeguard order to six months.
This decision serves as a warning to commercial landlords that even with clear leases favourable to their cause, when the use of premises is affected by government Orders, there is always the possibility that the Court will exercise its discretion and limit the amount of rent payable.
That being said, Cominar can still request an extension of the safeguard order and/or change the terms of that order once current health and safety measures and government Orders no longer apply. It could also file to claim the arrears of rent incurred since March 2020.
Once the current health measures are lifted and the Canada Emergency Rent Subsidy expires, it looks like the Court will have a very busy autumn session!
Tremblay vs. Soutex Inc., 2021 QCCQ 2420.