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Mar 19, 2019 · However, where a tenant goes bankrupt, the bankruptcy trustee has the power to disclaim the lease under section 30(1)(k) of the Bankruptcy and Insolvency Act (“BIA”). To the surprise of some landlords, this disclaimer will extinguish any right of the landlord to the unexpired term of the lease, save for a preferred three months’ accelerated rent claim pursuant to section 136(1)(f).
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Jul 6, 2020 · When a tenant goes bankrupt, the trustee-in-bankruptcy steps into their shoes and can choose to keep the lease in force, or assign, surrender, disclaim, or resile from the lease. The landlord will usually want to claim all the arrears and accelerated rent for the rest of the lease term.
Jun 9, 2020 · 1. The Landlord and Tenant were parties to a lease dated May 26, 2017 (the “Lease”). After the Tenant made an assignment in bankruptcy, the Trustee occupied the leased premises and paid occupation rent to the Landlord. The Landlord claimed $100,558.59 as a preferred claim for three months’ accelerated rent, in accordance with the priority ...
- Commercial Tenancies Act Ontario: Introduction
- Commercial Tenancies Act Ontario: The Facts
- Commercial Tenancies Act Ontario: The Landlord Draws Against The Loc
- Commercial Tenancies Act Ontario: The Landlord’S Proof of Claim
- Commercial Tenancies Act Ontario: The Landlord Appeals
- Commercial Tenancies Act Ontario: The Trustee’S Motion to A Judge
- Commercial Tenancies Act Ontario: The Landlord Has A Loc on Things
- Commercial Tenancies Act Ontariosummary
On October 28, 2020, the Court of Appeal For Ontario clarified the interplay between the Commercial Tenancies Act Ontarioand the Bankruptcy and Insolvency Act (Canada)(BIA) when a commercial tenant in Ontario goes bankrupt. In this Brandon’s Blog, I describe what the appellate court decided in the 7636156 Canada Inc.(Re), 2020 ONCA 681 (CanLII) cas...
The facts were not in dispute. On May 1, 2018, the corporate tenant filed for bankruptcyand the Trusteewas appointed. On July 23, 2018, the Trustee disclaimed the lease on the commercial premises. One of the schedules for the commercial leaserequired the tenant to lodge a letter of credit(LOC) in the amount of $2.5 million in favour of the landlord...
As of the bankruptcydate, there were no arrears of rent owing under the lease. Since the commercial tenant was bankrupt, the landlord made 3 claims on the LOC. These three claims totalled the full $2.5 million LOC value. The initial draw, in the amount of $207,732.28, was made on May 16, 2018, before the Trustee disclaimed its interest in the comme...
The landlord knew how to complete form 31 proof of claimand filed it with the Trustee. The landlord filed for a preferred claim in the amount of $623,196.84. The preferred claim was for 3 months’ accelerated rent: May, June, and July 2018. The landlord’s proof of claim also attached a schedule showing the calculations. In Ontario, a landlord’s pref...
The landlord appealed the disallowance to the Registrar in Bankruptcy. The Registrar permitted the landlord’s appeal partly. She held that considering that the landlord had drawn on the LOC for the May 2018 rent, the Trustee appropriately disallowed the preferred claim for the month of May. However, she further determined that the landlord was corr...
The Trustee wasn’t finished debating about the landlord’s rights to claim against the entire LOC given the Trustee’s disclaimer of the lease, the Commercial Tenancies Act Ontarioand the BIA. The Trustee made a motion to the court to determine what amount from the LOC the landlord was entitled to. The Trustee’s position was that the landlord was not...
The appellate court recognized that the ability of the landlord to rely upon the LOC for more than just its preferred claim depends on the wording of the lease. In this case, the lease stated that the LOC functions as safety and security for indemnification of the landlord for losses: “resulting from any termination, surrender, disclaimer or repudi...
I hope you have enjoyed this Commercial Tenancies Act Ontario Brandon’s Blog. A sick insolvent company’s business can be saved by a debt restructuring. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Teamunderstands how to do a compl...
Apr 14, 2020 · A: No. The landlord only has a preferred claim for 3 months after the bankruptcy. The landlord can still claim the remaining 3 months of accelerated rent – but as an ordinary unsecured creditor. Evidently, the foregoing also applies to an accelerated rent provision for any other amount (e.g. 9 months, or 12 months).
Trustees in bankruptcy are generally wary of electing to affirm the lease as it may become a personal liability of the Trustee. However, if the lease space can be assigned to a third party as part of an effort to maximize recovery for the bankrupt tenant’s estate, a Trustee may elect to affirm the lease.
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A lease held by two joint tenants on trust for themselves cannot be disclaimed unless both tenants are bankrupt and the two trustees in bankruptcy act together to effect a disclaimer; where only one of the joint tenants is bankrupt, a notice of disclaimer by the trustee in bankruptcy will not end the legal estate or the joint liability of the bankrupt and his co-tenant to pay the rent.
