Tenant Insolvency: Priority over Bailiff

Commercial tenants who are behind in their rent payments are subject to having the landlord seize their inventory or other chattels. The landlord will appoint a bailiff to seize, or distrain against, the assets on the landlord’s behalf. The bailiff is required to inventory the assets and have the assets appraised. After five days the inventory or other chattels can be sold.

All assets can be sold except property belonging to third parties and inventory subject to security granted under the Bank Act or a Purchase Money Security Interest. Normally, the bailiff takes his fees and pays the balance of the funds to the landlord on account of rent.

Any property under seizure for rent at the time a stay of proceedings is imposed by the BIA must be turned over to the Trustee. As previously stated, the costs of distress rank as a first charge against the property. If the bailiff has sold the property and the sale proceeds have yet to be turned over to the landlord, the proceeds must also be paid to the Trustee, less the costs of distress.

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