Quebec landlords and tenants ensnared in pandemic-related litigation

Pandemic-related litigation brewing in Quebec

Force majeure and peaceable enjoyment figure in recent court decision
Friday, August 14, 2020

Some legal practitioners foresee a spate of pandemic-related litigation in Quebec, where the Civil Code dictates landlords must provide tenants with “peaceable enjoyment” of the premises for the term of the lease except in the event of force majeure, or an unforeseeable circumstance that makes it impossible to fulfill that obligation. Commercial real estate specialists are noting a recent Quebec superior court decision — which awarded a tenant a reprieve on three months’ rent owed from March 24 to June 22 — with interest, suggesting it could become a beacon for other tenants seeking rent relief.

In this case, the Court determined that COVID-19 is a force majeure, absolving the landlord of its obligation to provide peaceable enjoyment. Thus, the landlord could not demand recompense for a service it was unable to provide.

A condition in the lease to protect the landlord’s claim to payment despite unavoidable delays, including in the event of force majeure, actually underpinned the Court’s decision in the tenant’s favour. “The Landlord’s fulfilment of its obligation to provide peaceable enjoyment of the premises from March through June of 2020 has not been delayed; it simply cannot be performed. Consequently, the Landlord cannot insist on the payment of rent for that period,” the decision states.

“The parties to a lease can agree to limit the impact of a landlord’s failure to provide peaceable enjoyment, but cannot agree to exclude it altogether,” note Géraldine Côté-Hébert, Pierre-Denis Leroux and Matthew Liben, lawyers practicing with Blake, Cassels & Graydon LLP in Montreal. “This view has been expressed in doctrine and has been endorsed by the Court of Appeal in CNH Canada Ltd. v. Promutuel Lac St-Pierre – Les Forges, société mutuelle d’assurances générales.”

The decision, issued in mid-July, is still potentially subject to appeal. While it may inspire or reassure some tenants in pursuit of rent relief, legal analysts predict future pandemic-related litigation could have different outcomes.

“The determination of a force majeure defence in Québec is eminently circumstantial and depends on a number of factors, such that each case should be reviewed independently and in accordance with the factual matrix at hand,” observe Céline Legendre, Yan Besner, Frédéric Plamondon, Julien Hynes-Gagné and Josy-Ann Therrien of Osler, Hoskin & Harcourt LLP.

Andrei Pascu, a partner with McMillan LLP’s litigation group, also points to two other recent Quebec superior court decisions, which denied landlords’ efforts to terminate leases — in part citing their refusal to take advantage of Canada Emergency Commercial Rent Assistance (CECRA) as evidence of lack of good faith and reasonableness. He concludes that the Court, thus far, is reluctant to add to struggling tenants’ economic stress.

“We recommend that landlords and tenants attempt to resolve their disputes outside of court in order to control the parameters of their contractual relationships,” he says. “Rather than allowing a third party to interfere with their leases, even when the contractual terms seem clear to them, landlords and tenants have an interest in finding common ground to navigate together through the COVID-19 trepidation.”

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