Tenant Insolvency: Proposals

Upon filing a proposal, or between the date of the filing of a Notice of Intention to File a Proposal and the filing of the proposal, a commercial tenant may disclaim a lease. The tenant must give the landlord thirty days notice of its intention to disclaim the lease. The form of notice is provided for in the BIA. The tenant is not obligated to negotiate the disclaimer with the landlord in advance.

Upon receiving the notice from the tenant, the landlord has fifteen days to apply to Court for a declaration that the tenant’s disclaimer is invalid. If the landlord applies for such a declaration, the tenant must prove to the Court that it is not able to file a viable proposal without the ability to disclaim the lease. The onus of proof is on the tenant. If the tenant fails to satisfy the Court, its disclaimer will be declared invalid.

If the tenant is successful, the lease is terminated and the landlord will have no claim for accelerated rent. However, the proposal must allow the landlord to file a claim as an unsecured creditor for its actual losses or for the lesser of:

  • The rent provided for in the lease for the first year following the date the disclaimer becomes effective, and fifteen per cent of the rent for the remainder of the term of the lease after that year, or
  • Three years rent.

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