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. Within the topic, there are two potential concerns – illegal distress and “accidental” terminations of a lease – when distraining.
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. 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 him or herself to damages, including possible personal liability, if committing 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;
b. the landlord or the bailiff breaks into the premises, or enters during a prohibited period;
c. exempt goods are seized;
d. the distress is made more than six months after the end of the term;
e. the landlord continues the distress after the tenant tenders the rent and costs of the distress; or
f. goods are seized off the premises when not permitted.
By way of example, in the British Columbia case of Beaver Steel Inc. vs. Skylark Ventures Ltd., the court found that the president of a company was personally liable for authorizing an illegal distress by allowing the bailiff to pick the locks and change the locks to the premises.
The court found that the company was liable for authorizing an illegal distress, but took the further step of finding the president personally liable as he knew the distress was probably unlawful and authorized the sale of the goods anyway.
It is important to note that because the illegal distress terminated the tenancy, the landlord was not allowed to claim rent after the date on which the locks were changed.
The appropriate approach when dealing with large items is to have the bailiff secure and sell the property on the premises as provided for in the Rent Distress Act.
Generally, it is sufficient for the bailiff to state that the goods are seized, but it is recommended that the bailiff place stickers on each item distrained. If the tenant attempts to retake the goods after they have been distrained, the landlord is entitled to recover triple damages and costs of the action.