After being denied the reduction, the company stopped paying rents altogether.

In March 2020, a company operating cafés and restaurants ceased operations at a café in downtown Montreal. Some weeks after, on account of the outbreak of the pandemic, the Quebec government restricted restaurants’ operations to car orders, takeouts, and deliveries. Then, the company sent a letter to its lessor stating that it was facing operational challenges and requested a rent reduction, which the former denied.

The company stopped paying its rent and the case went before courts. The company argued that government orders and decrees during the pandemic constituted a legal disturbance under Article 1858 of the Civil Code of Quebec (CCQ), pursuant to which “lessor is obliged to indemnify the lessee against any disturbance to the enjoyment of the leased property”. It claimed that these measures deprived the tenant of the enjoyment of the premises and that this situation qualified as a legal obstacle to the use of the property; the company further contended that the concept of legal disturbance should be broadly interpreted to include any legal impediment to property enjoyment.

On 11 October 2023, the Appeal Court of Montreal rejected the appeal filed by the tenant company. At the outset, the Court recalled that Article 1858 establishes a duty for the lessor to guarantee the lessee against legal disturbances that might impact the enjoyment of the leased property. It also acknowledged that such a disturbance could be a legal disturbance and that the concept of legal disturbance had progressively been expanded by the case law so as to encompass actions by public authorities that result in the prohibition of specific uses of premises such as, for example, zoning bylaws.

However, the nature of restrictions stemming from health decrees differs from those imposed by zoning bylaws, the Court held. While both government acts have the effect to establish a control on the use that can be made of a place, their rationale is radically different. Indeed, health decrees aim to restrict specific activities and gatherings for public health protection, not to manage buildings within a designated area, the Court held.

The Court stressed that “the health decrees do not really constitute a “purely legal” disturbance, but the consequences of a purely factual situation, in this case COVID-19, and the resulting health emergency”; therefore, considering “the nature of the event, its one-off nature and the fact that it occurred after the conclusion of the contract”, Article 1858 does not apply. According to the Court, to hold otherwise would risk transforming the provision into one that places a wide array of contractual risks on the lessor, with unforeseeable consequences.

Reference: Court of Appeal of Montreal, Franchise MTY inc. c. Lechter (Édifice professionnel de Montréal), 11 October 2023.

Full text of the decision available at fr