Tenant Insolvency: Trustee’s Right to Occupy

The Commercial Tenancy Act (“CTA”) allows a Trustee to occupy the debtor’s premises for three months following the date of the bankruptcy unless the lease has been terminated before bankruptcy or unless the tenancy is a monthly one. However, in our view, the Trustee has a right to three months occupancy even in the case of a month to month tenancy.

The purpose of the three-month period is to provide the Trustee with an opportunity of selling the assets at the highest price. Although the landlord is not entitled to distrain against the Trustee, the Trustee is responsible for occupation rent during this period.

Several factors will affect a Trustee’s decision to occupy the premises or remove the assets immediately. However, the primary factor is the value of the assets vis-à-vis the cost of occupation. In certain circumstances, the nature of the assets will preclude immediate removal, i.e. large retail operations, manufacturing plants, etc.

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