February 28, 2025

By Mark Mikulasik

If a commercial tenant repudiates the lease, that is, says they no longer intend to perform their side of the bargain the landlord has two options:

• they may immediately terminate the lease by following the procedures in the law, or
• they may refuse to accept the repudiation and treat the lease as continuing.

THE ISSUE

Why, you might ask, would a landlord ever refuse the repudiation?

THE CASE

The answer is found in the Ontario Court of Appeal decision in Canada Life Assurance Company v. Aphria Inc.,  , which confirms that a landlord which refuses to accept the repudiation does not have an obligation to remarket the property or otherwise re-rent the property. The landlord may simply sue the tenant for the remaining value of the lease payments.

The usual situation in a breach of contract case is that the Plaintiff must “mitigate their damages”, in other words, reduce their loss through reasonable efforts.

However, the Supreme Court of Canada in a 1971 decision by Thunder Bay’s own Justice Bora Laskin said there is no obligation on a landlord who refuses to accept repudiation by the tenant to mitigate as long as it keeps the lease in good standing (by not re-renting the premises, and maintaining the premises in accordance with the lease).

The tenant in the recent case tried to convince the Court of Appeal that the Supreme Court ruling should no longer be applied in Ontario, despite it having been applied by judges for 50 years. Judges do not change things just because a principle is old.

The Court of Appeal told the tenant to take it up to the Supreme Court. Otherwise, it would take an amendment to the Commercial Tenancies Act to change the law.

TAKEAWAYS

Refusing to accept the repudiation creates some technical hurdles that are different than simply treating the lease as at an end. Not mitigating is a smart decision only:

• if you are pretty confident the tenant will be around to be sued and pay the accumulating rent;
• you have other properties to offer to any prospective tenants who come along.

The decision whether to accept or refuse the repudiation is one best made in consultation with an experienced commercial real estate lawyer.

WHAT WEILERS LLP CAN DO TO HELP YOU

Our team of experienced commercial and real estate lawyers know how to give you the commonsense advice that you need if a tenant repudiates their lease.

If you are unlucky enough to have  to bring a lawsuit to collect rent, our litigation team is skilled at locating, assembling, and presenting the evidence in the best possible way to attempt to assist you to claim the moral high ground favoured by the courts.

Whether you are entering into a new commercial or residential real estate deal, or in a dispute at the end of the deal, please call us and see if Weilers LLP are the right lawyers for you.