Commercial Rent Distress

                                               

A remedy all commercial landlords should be aware of, particularly where tenants own valuable equipment, is that of distress. Simply put, distress allows a commercial landlord to seize and eventually sell a tenant's goods to reimburse a landlord for rental arrears. Many landlords are wary of this remedy because of the possibility of being sued. However, exercised correctly and with the proper legal advice, distress can be a valuable tool. This article will focus on how to                                                       avoid two potential concerns – illegal distress and "accidental" terminations of a lease – when distraining.

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Distress is a traditional remedy dating back to the old English common law, but is now restricted by provincial statute, the Rent Distress Act, R.S.B.C. 1996, c. 403 (the "Rent Distress Act"), in British Columbia and the Civil Enforcement Act, R.S.A. 2000, c. C-15, in Alberta.

Distraining for unpaid rent is an affirmation of the lease and a landlord may not distrain goods after the lease is terminated as a result of default by the tenant. In addition, a landlord can only distrain the personal property of the tenant who is liable for the rent and a landlord cannot distrain tenants' fixtures or improvements.

While the general rules regarding distress are similar across Canada, the statute in Alberta is unique as it has been merged into the general civil enforcement scheme. The most notable difference is that a distress in Alberta must be conducted through a civil enforcement agency. This article pertains to the law in British Columbia and the Rent Distress Act, but similar concerns arise in both jurisdictions.

The first concern is ensuring that the distress is not illegal. This is an important concern as a landlord may expose itself to damages, including possible personal liability, if it commits an illegal distress. An illegal distress is when:

  • there is no tenancy (if there is a licence or other interest); 

  • no rent is due; or 

  • when rent is due, but:

a. the landlord has terminated the lease;