Explosion of investments and increased complexity of residential projects
The legal framework of commercial leases in Quebec
Unlike a residential lease, a commercial lease is not protected by the provisions of the Act respecting the Tribunal administratif du logement. It is mainly governed by the general provisions of the Civil Code of Québec on leasing (articles 1851 et seq.) and by the terms negotiated between the parties. This contractual freedom means that the obligations of each party depend largely on what is stipulated in the lease — hence the paramount importance of rigorous drafting.
Several elements are frequently a source of dispute: renewal clauses, repair and maintenance obligations, exclusivity clauses, terms of assignment or subletting, and termination conditions. Each clause must be interpreted in light of the Civil Code and the case law applicable to civil and commercial litigation.
The most common commercial lease disputes in Montreal
Failure to pay rent remains the most common cause of dispute. The landlord has specific remedies, including terminating the lease and claiming unpaid rent and damages. However, the courts usually require that the landlord have put the tenant on notice before terminating, and the tenant can sometimes get a grace period.
Disputes relating to the inventory of fixtures are also frequent. The obligation to maintain and repair is often at the centre of the dispute: the tenant criticises the landlord for not keeping the building in good condition, while the landlord invokes the tenant’s routine maintenance obligations. The distribution of these obligations depends on the terms of the lease, which often provide for so-called “triple net” clauses that shift most of the charges to the tenant.
Renewal disputes arise when the parties do not agree on the terms of the new lease. In the absence of an automatic renewal clause, the commercial tenant does not have the right to remain in the premises — a major difference with the residential regime.
Risk factors specific to the Montréal context
< class=" text-white">
Early termination and its consequences
Early termination of a commercial lease can result in claims of several hundred thousand dollars. The landlord can claim all remaining rent until the end of the lease, relocation costs, loss of ancillary income and the costs of restoring the premises. The tenant, for his part, can invoke the landlord's breach of its essential obligations to justify the termination.
Mediation and arbitration are often effective alternatives to litigation in these situations. A negotiated settlement allows the parties to control the outcome of the dispute and avoid the delays and costs of a full trial.
Protecting your interests from the drafting of the lease
The best strategy to avoid a commercial lease dispute is to negotiate and draft a comprehensive and balanced lease from the start. The essential clauses to check include the duration and conditions of renewal, the distribution of operating expenses, the terms of assignment and sublease, territorial exclusivity clauses, termination conditions and applicable penalties.
A commercial litigation attorney can identify areas of risk in an existing lease and propose changes before those risks materialize into costly litigation.
