Force Majeure Triggers Lease Extension

In a recent Ontario Court of Appeal case—Niagara Falls Shopping Centre v. LAF Canada (2023 ONCA 159)—the court was tasked with considering the effect of a government mandated COVID-related closure on a commercial lease for the operation of a fitness centre.

At trial, the judge reviewed the “force majeure” provision in the lease, and determined that the obligation of the tenant to pay rent continued despite the government “lockdown”. However, the trial judge did not agree to extend the term of the lease for a period equal to the period of lockdown.

The Ontario Court of Appeal agreed that the tenant was required to pay rent during the lockdown period, given the wording of the force majeure provision. However, the court went further, and agreed with the tenant that the term of the lease should be extended for a period of time equal to the lockdown, being approximately 9 months.

Additionally, without much explanation for its decision, the appeal court determined that the tenant would not be required to pay rent during this extension period, given that it had been required to pay rent during the lockdown period.  With monthly rent in excess of $100,000, the effect of this rent-free extension on the landlord is significant, and it would have been helpful if the court had provided more of an explanation for its decision.

One “take-away” from this decision is that landlords may wish to add language into their force majeure provisions to ensure that a force majeure event will not result in an extension of the lease term. Additionally, landlords may face challenges from tenants who were required to pay rent during periods that a government mandated closure was in effect.

For more information about commercial leasing, please contact Peter Anderson.