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Force Majeure: A Tale of Two Clauses…

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Peter Leigh

Peter is a litigator and the founder of leigh.law. He has litigated for some of Canada's highest profile corporations and as Crown counsel for Her Majesty the Queen. His practice now focuses solely on complex commercial disputes and real property disputes, including construction litigation.

Force Majeure: A Tale of Two Clauses…

Force majeure clauses tend to have two salient components: the definition of a force majeure event (hereinafter defined as a “Force Majeure Event”); and (2) the remedies that flow when a Force Majeure Event exists.

Whether an event is a Force Majeure Event depends on: (1) the nature of the event; and (2) the wording of the force majeure clause. It is therefore possible for an event, in this case the lockdowns, to be a Force Majeure Event in one contract but not another, or for one party to a contract and not the other.

Litigators should therefore be cautious in relying on one case to establish the existence of a Force Majeure Event in their case because the contractual terms likely differ between cases. Similarly, they should not argue that a particular outcome in one case should apply to their case if the remedies prescribed in the clause differ between cases.

Solicitors should pay particular attention to the type of remedy that flows from the existence of a Force Majeure Event in crafting commercial leases for their clients. The ability of the client to sustain interrupted cash flow will be paramount in drafting the clause.

Analysis

In Niagara Falls Shopping Centre Inc. v. LAF Canada Company, 2023 ONCA 159 (“Niagara”), the tenant fitness facility experienced financial hardship during the lockdowns because it did not require its members to pay fees during such times. It stopped paying rent as a result, relying on the force majeure clause in the lease. However, a Force Majeure Event, as defined in the lease, specifically excluded financial inability from the definition of the Force Majeure Event. Therefore, while the landlord’s inability to provide the premises was excused as a Force Majeure Event, the tenant was still obliged to pay rent during that period.

A similar situation occurred in Windsor-Essex Catholic District School Board v. 2313846 Ontario Limited o/a Central Park Athletics, 2022 ONCA 235 (“Windsor”). The landlord sports facility shutdown due to the lockdowns, depriving the tenant school board use of the facility. Here the parties agreed there was a Force Majeure Event, and the tenant continued to pay rent throughout. However, unlike in Niagara, here the lease required the landlord to provide an abatement of rent during the Force Majeure Event (ie the lockdown) periods.

real estate disputes.

Whether by agreement or in court, we resolve disputes relating to commercial tenancies, agreements of purchase and sale, and mortgage enforcement.

Commercial landlords and tenants retain us in disputes relating to lease termination, rent arrears, non-rent breaches like unauthorized improvements or sub-leases, and bailiff intervention.

We assist mortgage holders (lenders) and mortgagors (borrowers) in foreclosure and sale proceedings, and partition and sale proceedings.

We represent residential sellers and purchasers in disputes relating to failed or aborted APS transactions, after-sale defects discovered at the property, and negligence claims against agents, brokers, and brokerages.
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Our Real Estate Law practice focuses on dispute resolution in commercial leasing, mortgage enforcement and residential APS. We are an experienced counsel in a spectrum of issues including boundary disputes, forfeiture and re-entry under commercial leases, contract breaches, mortgage enforcement, Commercial Tenancies Act disputes, and property title issues. With a steadfast commitment to protecting our clients’ interests and resolving conflicts through strategic negotiation or vigorous litigation when necessary, leigh.law is a trusted advisor to their clients in navigating the intricacies of real estate disputes. Trust us to safeguard your rights while ensuring timely and fair resolution of disputes.

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commercial tenancy disputes.

Commercial tenancies disputes are those between a commercial landlord and their tenant (or sub-tenant). This is an old and complex area of law that derives rules from statute and the common law (ie judge made law). However, the most important document governing the relationship between the commercial landlord and tenant is the commercial lease, which is a type of contract specific to this area of law. We have acted for dozens of landlords and tenants in various commercial leasing disputes.

The lease will generally identify the leased property, the parties to the lease, the term (ie length) of the tenancy, and the amount of rent owed (including additional rents like taxes, maintenance and interest (TMI)). Leases also prescribe events of “default” by the tenant, which usually include non-payment of rent, unauthorized subletting or assignment of the lease, or unauthorized improvements of the land by the tenant. When events of default occur, the relationship between a landlord and tenant can sour quickly and landlords often retain the services of a bailiff. 

In the commercial leasing context, a landlord has sweeping power to ensure rent is paid and general compliance with the terms of the lease. These powers include self-help remedies like distress, which empowers a landlord to enter the leased premises and seize the tenant’s goods in order to satisfy rent. This type of remedy is unique to commercial leasing law, and entails specific rules that a landlord must follow if they choose to exercise it. 

Another way landlord’s enforce the lease is by terminating the tenancy and changing the locks on the premises, thereby denying the tenant the ability to use it and carry on its business.

A landlord will usually retain the services of a bailiff to effect their enforcement. Bailiff are licensed professionals that do things like change locks on premises and then negotiate with tenants for continued entry to a premises while rent arrears are being paid. They also assist landlords in distraining (ie seizing) a tenant’s goods for sale at a public auction in order to satisfy rent arrears. Bailiffs are supposed to be specialized and knowledgeable in the area of commercial leasing and understand the rules surrounding distress, termination or forfeiture of a lease, and the right of re-entry. However, in our experience bailiffs often times overstep their authority and need to be checked by a court, which maintains the ultimate jurisdiction to make determinations about a lease dispute.

Since the rules around commercial leases are derived from multiple sources (ie the lease, the Commercial Tenancies Act, and the common law) they can be complex and are always case-specific. At the same time, the landlord’s authority to enforce the lease can be sweeping and destroy a tenant’s business. They are therefore extremely powerful when exercised properly. When exercised improperly, however, the ramifications can be expensive if a court orders damages for a illegal conduct. It is therefore very important to consult a commercial leasing lawyer prior to and during any disputes between landlords and tenants.

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residential APS disputes.

A house is often a person’s biggest asset, and buying or selling a home is therefore one of the most impactful and important processes a person can undertake. When a residential real estate purchase goes wrong, the buyer or the seller, can be left with huge bills they are responsible for in their personal capacity. Adding to this dilemma recently cooling real estate market precipitated by rising interest rates which has led to a fall in house prices. The result has been that agreements of purchase and sale quickly become outdated and no longer reflect market prices when closing occurs months later. When an APS does not close in this context, home sellers can experience huge losses when they try to resell the same property later to different buyers. Depending on the terms of the APS, sellers may look to purchasers to pay for the difference, which can mean hundreds of thousands of dollars in damages.

Residential real estate litigation is dictated by the terms of the APS and the common law (ie judge-made law). It can also engage negligence law depending on the conduct of a real estate broker or sales agent when the latter acts as agent to the buyer or seller in the transaction. 

Disputes also arise after a buyer moves into a home. In the latter context, homeowners often find deficiencies or defects in the property they purchased that were not disclosed prior to the sale.

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real estate law services.

Commercial

Resolving Complex Real Estate Conflicts. leigh.law’s Real Estate Law division offers adept legal guidance and representation in intricate commercial tenancies disputes, safeguarding your interests and striving for fair and effective resolutions.

Residential

Navigating Real Estate Contracts. A residential real estate transaction is often the highest value purchase or sale a person makes in their life. When things fall apart, the financial implications can be disastrous and far outstrip what the home buyer or seller can reasonably absorb. It is therefore very important to engage a lawyer as early as possible in the process and as soon as problems arise.

Mortgage Disputes

Resolving Complex Real Estate Issues. Rising interest rates means more and more people are defaulting on mortgages. We act for mortgagors and mortgagees in private and commercial mortgage disputes. We have a wealth of experience enforcing and resisting mortgage foreclosure proceedings.

Contracts

Precision in Real Estate Contracts. leigh.law’s Real Estate Law division offers meticulous expertise in drafting, reviewing, and interpreting contracts, ensuring clarity and protection of our clients’ interests in property transactions.

Why you need a real estate lawyer.

Navigating the complexities of real estate transactions demands legal expertise. At leigh.law, our Real Estate Law division understands the intricacies and potential pitfalls within property dealings. From contract intricacies to intricate legal nuances, having a seasoned real estate lawyer ensures comprehensive guidance, protection of your rights, and a smooth journey through the intricacies of property transactions. Trust leigh.law to safeguard your interests and provide invaluable support in every step of your real estate endeavors.

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meet your lawyer.

Peter Leigh is a litigator and the founder of leigh. law. He is a former prosecutor and Bay Street litigator.

Peter spent the first seven years of his legal career at McCarthy Tétrault, where he litigated high-stakes and high-profile disputes for some of the country’s most prominent corporations, institutions, and individuals. He then joined the Ministry of the Attorney General as a Crown Attorney in his hometown of Hamilton, where he prosecuted criminal trials and hearings related to fraud, breach of trust, sexual assault, property crimes, and guns and gangs.

Peter brings to bear his experience, dedication, and fearlessness to every client’s dispute. He acts for corporations, shareholders, professionals and individuals in a wide range of litigation including shareholder and partnership disputes, real property litigation, professional and personal liability claims, and allegations of fraud. He has litigated cases at all levels of court in Ontario, and arbitral and administrative tribunals across the province.

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real estate law faq.

Here are some answers to frequently asked questions regarding Real Estate Law. If you don’t find the answer you are looking for, please contact us.

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While always beneficial, construction contracts can be formed with or without a written contract.

The contractor’s right to lien a property arises automatically by virtue of them having provided services and materials to property. This automatic lien generally lasts for 60 days from the date the contract is completed or substantially performed. The lien must then be ‘preserved’ by registering it, and then ‘perfected’ by commencing a lawsuit. There are strict timelines associated with each stage of the lien which, if not followed, are fatal to the ability to claim the lien.

Ontario’s new Construction Act has a “prompt payment” regime which allows the parties to the contract to settle disputes that arise as the project unfolds. This new feature of the Act allows for timely resolution of minor disputes before they become major. Lie the Act as a whole, the prompt payment regime entails strict timelines that must be followed.

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Email: peter@leigh.law

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