Hell or High Water – Tenancy Law and Natural Disasters

In this blog we will consider the consequences that flow with regard to a landlord and tenant relationship where a mandatory evacuation order is issued, requiring all persons in the area of the leased property to evacuate the area for approximately one month or more due to wildfires. As you will see below the law in this area is counter to what one might expect. Always keep in mind, however, that cases and circumstances can be very fact specific and anyone facing a legal challenge on this issue or any other should seek legal advice with respect to the circumstances.

Case-law indicates that in situations of mandatory evacuation orders, the obligation to pay rent continues. In the 2013 case of Seward v. MacRae a Tenant leased third floor apartment unit from a landlord in Calgary. As a result of flooding in Calgary in the summer of 2013, a mandatory evacuation order was issued under the Emergency Management Act for several districts and communities.

The district in which the apartment building and premises were located was subject to the mandatory evacuation order, which prevented the tenant from occupying the premises for a 17 day period in June and July of 2013. The Tenant brought an application for abatement of rent for the period of time that his premises were subject to the mandatory evacuation order.

The Application was dismissed by the Court. Abatement of rent was available where the landlord breached the residential tenancy agreement or the Residential Tenancies Act. The Court found that a mandatory evacuation order due to flooding was neither an act of commission or omission of the landlord. The Landlord had no ability to remedy the situation by allowing the tenant possession of the premises during the mandatory evacuation order.

Similarly, the 2002 Ontario case of Guest v. Groleau, confirms this same approach in even broader terms:

“The question is, in the present case, whether the flooding of the rental unit and the need for repairs requiring the unit to be vacant is a supervening event that falls within the definition of frustration… To make this determination one must make an assessment of all the factual circumstances of each case to determine both the foreseeability of the event and whether performance of the contract has been rendered impossible

While it is true that, with the flood, the rental unit and its ability to be used as such constitutes a significant change in the nature of the parties’ contractual rights and obligations. However, can it be said in these circumstances that this change is one that could not have been reasonably contemplated by the parties at the time they entered into their tenancy agreement, or, that it would be unjust to hold them to their respective stipulations in that agreement?

The first part of the question can, I believe, be answered fairly easily. Catastrophic events such as fires and floods, that might render a housing unit unfit for occupancy for a period of time, while thankfully rare, are not so infrequent or unusual as to be able to be considered unforeseeable. The fact that many tenants and most landlords obtain insurance against exactly such risks suggests that these kinds of catastrophic events are reasonably foreseeable and that many people have considered those very risks and made some provision for them.

In respect of the second part of the question, that of performance being rendered impossible, in my opinion, the answer is partly to be found in the statement of Lord Simon that frustration cannot be found simply because of the “expense or onerousness” to one party if they are bound by their contractual stipulations. I also take some direction on this point from the case of “Dominion Coal Co. v. Lord Strathcona Steamship Co.(1925), [1926] 1 D.L.R. 873, [1926] A.C. 108 (Nova Scotia P.C.) at p.114, where Lord Shaw stated,

Frustration can only be pleaded when the events and facts on which it is founded have destroyed the subject matter of the contract, or have, by an interruption of performance thereunder so critical or protracted as to bring an end in a full and fair sense the contract as a whole, so superseded it that it can be truly affirmed that no resumption is reasonably possible.

From these statements of the law it is clear that before a contract can be found to have been frustrated there must be some consideration given not only to the seriousness of the change brought on by the supervening event but, also to the issue of how long performance of the contract has been or will be interrupted as a result. The concept of “impossibility” of performance requires some temporal dimension – something to measure the spectrum from “never possible” to “not possible today, but possible tomorrow”. If the interruption of contractual performance is not protracted, then perhaps that interruption does not constitute frustration of the contract. I also take Lord Simon’s comment as adding a limitation that “impossibility” of performance cannot be determined by reference only to the expense or difficulty of carrying out the contractual obligations in light of the changed circumstances.

All of these matters must be carefully weighed in light of the evidence of each individual case. Without setting out an exhaustive list of considerations that might be taken into account, I have considered the following factors in arriving at my decision. The first is that there is no question, on the evidence before me, that the degree of the change in the parties’ contractual arrangement was profound: the Tenants could not remain living in the apartment in its damaged condition nor could they remain in the apartment during the course of repair. I have also considered the fact that the evidence was that the rental unit could have been repaired within a month of the flood. Significant as well is the fact that there was no suggestion in the evidence that the Landlord did not intend to repair the premises. As such, this is not a case where the cost of remedying the actual defect that requires the tenant to vacate is exorbitant or financially unreasonable. The Landlord, from the outset, intended and was prepared to carry out the repairs necessary to return the rental unit to its pre-flood condition. I have taken into account, as well, that a landlord is not relieved of the covenant for quiet enjoyment just because the breach of the covenant has arisen from an act of nature or from other circumstances that do not amount to a breach of the landlord’s obligation to repair or maintain. (See Bramar Holdings Inc. v. Deseron, [1996] O.J. No. 1013 (Ont. Gen. Div.);McKay v. Frankel, [1988] O.J. No. 1774 (Ont. Dist. Ct.).

Having taken these factors into account, I find that the inability of the Landlord to provide continued occupancy of the rental unit by the Tenants and the reasons therefore do not constitute grounds for declaring that the tenancy agreement has been frustrated as a matter of law. I am of the opinion that the need to vacate the rental unit for a period of a month to complete repairs is not, in all the circumstances, such a protracted interruption of the Landlord’s contractual performance as to entitle him to say that the tenancy agreement has been frustrated. Accordingly, the Landlord was not entitled to require the Tenants to vacate and, de facto, terminate the tenancy. Since the tenancy continued and yet the Tenants were not able to occupy the unit, that covenant for quiet enjoyment has been breached. I would also find that by giving the Tenants a notice to terminate that did not comply with the notice provisions of the Tenant Protection Act, 1997, also constitutes a substantial interference with the Tenants’ reasonable enjoyment of the rental unit.”

It is notable that in the above case, the period of inability to access the leased premises was one entire month, yet the court did not find the lease agreement to be frustrated or terminated, even though the landlord was to blame in this regard.

It seems that often, even where the landlord is to blame, an inability to access the leased premises will fall far short of demonstrating frustration. In addition, the courts are extremely wary about allowing temporary suspensions of access to leased premises to result in a finding of frustration, especially where the landlord is not at fault.

It is also notable that in the case of the Fort McMurray Wildfire the landlord has not in any way frustrated or restricted the tenant from accessing the property. In fact, it is likely that the tenant still has possession in the sense that his or her belongings are still there, and the landlord has not retaken possession for his or her own benefit.

In fact, some Canadian cases indicate that frustration rarely, if ever – has any application in the situation of a lease agreement. In situations where there is no frustration, and a tenant cannot access the premises through no fault of the landlord, the obligation to pay rent continues.

I have also considered case-law from other countries, such as the United Kingdom. These cases also indicate that even long interruptions in enjoyment of leased properties do not amount to frustration. In the case of National Carriers Ltd. v. Panalpina (Northern) Ltd. a 20 month closure of a street providing sole access to a warehouse during the fifth year of ten year lease did not frustrate a lease.

These cases demonstrate that it is quite unlikely that a court will make a finding that the lease agreement is in fact frustrated by the events surrounding the Fort McMurray wildfire and the evacuation of the community. Despite not being allowed to live in Fort McMurray because of the mandatory evacuation, lease agreements are still valid and therefore, there remains an obligation for the Tenant to pay rent to the Landlord. In circumstances where the building has been destroyed a strong argument for frustration of the contract exists to bring the lease to an end.

If you have questions about this issue or any other legal matter please contact Don Scott McMurray Law Office at 780 750 9888.