Distrainment (CTA)

Commercial Tenancies Act, R.S.O. 1990, c. L.7

22 Where a lessor has commenced an action to enforce a right of re-entry or forfeiture under a covenant, proviso or stipulation in a lease, every person claiming any right, title or interest in the demised premises under the lease, if it is known to the lessor that the person claims such right or interest or if the instrument under which the person claims is registered in the proper land registry office, shall be made a party to the action. R.S.O. 1990, c. L.7, s. 22.

30 (1) The goods and chattels exempt from seizure under execution are not liable to seizure by distress by a landlord for rent, except as hereinafter provided.

(2) In the case of a monthly tenancy, the exemption only applies to two months arrears of rent.

(3) The person claiming the exemption shall select and point out the goods and chattels that the person claims to be exempt.

31 (1) In this section, subject to section 32,

“tenant” includes a sub-tenant and the assigns of the tenant and any person in actual occupation of the premises under or with the assent of the tenant during the currency of the lease, or while the rent is due or in arrear, whether or not the person has attorned to or become the tenant of the landlord. R.S.O. 1990, c. L.7, s. 31 (1).

(2) A landlord shall not distrain for rent on the goods and chattels of any person except the tenant or person who is liable for the rent, although the same are found on the premises; but this restriction does not apply in favour of a person claiming title under an execution against the tenant, or in favour of a person whose title is derived by purchase, gift, transfer, or assignment from the tenant, whether absolute or in trust, or by way of mortgage or otherwise, nor to the interest of the tenant in any goods or chattels on the premises in the possession of the tenant under a contract for purchase, or by which the tenant may or is to become the owner thereof upon performance of any condition, nor where goods or chattels have been exchanged between tenants or persons by the one borrowing or hiring from the other for the purpose of defeating the claim of or the right of distress by the landlord, nor does the restriction apply where the property is claimed by the spouse, daughter, son, daughter-in-law, or son-in-law of the tenant, or by any other relative of the tenant’s, if such other relative lives on the premises as a member of the tenant’s family, or by any person whose title is derived by purchase, gift, transfer or assignment from any relative of the tenant’s to whom the restriction does not apply. R.S.O. 1990, c. L.7, s. 31 (2); 1999, c. 6, s. 9 (2); 2005, c. 5, s. 10 (3); 2016, c. 23, s. 40.

(3) Nothing in this section exempts from distress goods or chattels in a store or shop managed or controlled by an agent or clerk for the owner of the goods or chattels where the clerk or agent is also the tenant and in default, and the rent is due in respect of the store or shop or premises rented therewith and thereto belonging, if the goods or chattels would have been liable to seizure but for this Act. R.S.O. 1990, c. L.7, s. 31 (3).

33 (1) A tenant in default for non-payment of rent is not entitled to the benefit of the exemption provided for by section 30 unless the tenant gives up possession of the premises forthwith or is ready and offers to do so. R.S.O. 1990, c. L.7, s. 33 (1).

(2) The offer may be made to the landlord or to the landlord’s agent, and the person authorized to seize and sell the goods and chattels, or having the custody of them for the landlord, shall be considered an agent of the landlord for the purpose of the offer and surrender to the landlord of possession. R.S.O. 1990, c. L.7, s. 33 (2).

34 (1) A landlord that desires to seize exempted goods shall, after default has been made in the payment of rent and before or at the time of seizure, serve the tenant with a notice (Form 1). R.S.O. 1990, c. L.7, s. 34 (1).

(2) The surrender of possession in pursuance of the notice is a determination of the tenancy. R.S.O. 1990, c. L.7, s. 34 (2).

35 (1) A tenant may set off against the rent due a debt due to the tenant by the landlord. R.S.O. 1990, c. L.7, s. 35 (1).

(2) Notice of the claim of set off (Form 2) may be given before or after the seizure. R.S.O. 1990, c. L.7, s. 35 (2).

(3) When the notice is given, the landlord is entitled to distrain, or to proceed with the distress, only for the balance of the rent after deducting any debt justly due by the landlord to the tenant that is mentioned in the notice. R.S.O. 1990, c. L.7, s. 35 (3).

43 Distress shall be reasonable. R.S.O. 1990, c. L.7, s. 43.

55 (1) A distrainor who takes an excessive distress, or takes a distress wrongfully, is liable in damages to the owner of the goods or chattels distrained. R.S.O. 1990, c. L.7, s. 55 (1).

(2) Where a distress and sale are made for rent pretended to be in arrear and due when, in truth, no rent is in arrear or due to the person distraining, or to the person in whose name or right such distress is taken, the owner of the goods or chattels distrained and sold, the owner’s executors or administrators are entitled, by action to be brought against the person so distraining, to recover full satisfaction for the damage sustained by the distress and sale. R.S.O. 1990, c. L.7, s. 55 (2).

66 (1) Where goods or chattels are distrained by a landlord for arrears of rent and the tenant disputes the right of the landlord to distrain in respect of the whole or any part of the goods or chattels, or disputes the amount claimed by the landlord, or the tenant claims to set off against the rent a debt that the landlord disputes, the landlord or the tenant may apply to a judge to determine the matters so in dispute, and the judge may hear and determine them in a summary way, and may make such order in the premises as he or she considers just. R.S.O. 1990, c. L.7, s. 66 (1).

(2) Where the tenant disputes the right of the landlord to distrain in respect of the whole or any part of the goods or chattels, or disputes the amount claimed by the landlord, the landlord or the tenant may, before any distress has been made, apply to a judge to determine the matter so in dispute, and the judge may hear and determine it in a summary way, and may make such order in the premises as he or she considers just. R.S.O. 1990, c. L.7, s. 66 (2).

(3) An application under this section shall be made, heard and determined in the county or district in which the distress is made. 1993, c. 27, Sched.

Pita Royale Inc. v. Buckingham Properties Inc., 2017 ONSC 5976 (CanLII)

[1] The plaintiff brings this action for damages for illegal distraint and improper termination of a commercial lease. He seeks damages as follows: $200,000 for illegal distraint and improper termination of the lease; $400,000 for loss of business and intentional interference with economic relations; and $350,000 for punitive and exemplary damages.

[2] The defendant counterclaims for arrears of rent and improvements owing in the amount of $10,879.

[127] Nunn J. explains in Peters v Green Scene Ltd. (1991), 1991 CanLII 4406 (NS SC), 103 N.S.R. (2d) 414 (S.C.), “[d]istraint is a common law remedy only available against arrears of rent and only available when the landlord and tenant relationship continues. Distraint is a recognition that the lease continues.”

[128] The right of distraint (also known as distress) is a common-law right available to landlords for recovery of arrears of rent under a lease. It allows landlords to seize goods and chattels on the leased land in question and owned by the tenant. The remedies of forfeiture and distress are mutually exclusive at law and, therefore, the landlord must choose between the right of forfeiture or the right of distraint. Where the landlord elects forfeiture, a simultaneous distraint is illegal and will result in the landlord being liable to the tenant for the full extent of the tenant’s damages: see Falwyn Investors Group Ltd. v. GPM Real Property (6) Ltd., [1998] O.J. No. 5258 (Gen. Div.); Sigrist v. McLean, 2011 ONSC 7114, [2011] O.J. No. 5865; Peters v. Green Scene Ltd.; Country Kitchens Ltd. v. Wabash Enterprises Ltd, [1981] N.J. No. 3 (Nfld. C.A.).

[129] A landlord who terminates the lease is not thereafter entitled to distrain goods and fixtures belonging to the tenant: Re Lussier et al. and Denison, 1971 CanLII 737 (ON SC), [1972] 3 O.R. 652 (Co. Ct.), aff’d (1972) 1972 CanLII 378 (ON SC), 3 O.R. 656 (C.A.); North Bay T.V. & Audio Ltd. v. Nova Electronics Ltd.(1983), 1984 CanLII 2100 (ON CA), 44 O.R. (2d) 342.

[130] In Malka v. Vasiliadis, 2011 ONSC 5884, [2011] O.J. No. 4523, Campbell J. held at para 133, “the law is clear that when a tenant defaults on the obligation to pay rent, the landlord has two mutually exclusive legal remedies, and must elect which remedy to pursue. The landlord can elect to re-enter the premises and distrain the goods owned by the tenant for purposes of satisfying the debt owed by way of rent, but with a view to continuing the lease. Alternatively, the landlord can elect to retake possession of the premises and terminate the lease, and potentially pursue other additional remedies.”

[131] The law is clear that a landlord cannot both terminate the lease and distrain, which the defendant did in this case: Mundell v. 796586 Ontario Ltd., [1996] O.J. No. 2532 (Gen. Div).

[132] The jurisprudence is clear that for distress to be reasonable, a landlord cannot seize and sell more goods that are reasonably necessary to satisfy the arrears of rent: 1526183 Ontario Ltd. v Grant Equipment Corp., 2010 ONSC 928, [2010] O.J. No. 812.