Relief From Forfeiture In Commercial Lease Renewals

Commercial leases usually contain specific requirements that a tenant must observe in order to avoid a breach of the lease. Breaching the lease often entitles the landlord to terminate the lease and require the tenant to vacate the premises.

Relief from forfeiture is a powerful remedy that, in exceptional cases, allows a court to reinstate a commercial lease even when the landlord’s termination of the lease was valid. The courts of British Columbia will only grant this remedy to prevent harsh or unfair outcomes to tenants in cases where the breach is fairly minor or technical, where the termination would result in a substantial loss to the tenant, and where reinstatement of the lease would not be unfair to the landlord.

The Legal Framework & Availability of Relief

In British Columbia, the power to grant relief from forfeiture comes from the Supreme Court’s inherent equitable (fairness) jurisdiction, as opposed to the law of contract, which emphasizes holding parties to their original bargain. As a result, the remedy is discretionary, and the court will evaluate tenants’ requests on a case-by-case basis. It is most commonly granted in cases involving the non-payment of rent. If a tenant can pay all outstanding arrears, interest, and the landlord’s legal costs, courts will usually assist a tenant by excusing the breach, reinstating the lease and allowing the tenant to remain in possession despite the valid termination by the landlord. For non-monetary breaches, such as failing to make repairs or assigning the lease without the landlord’s consent, relief from forfeiture is harder to obtain but still possible if the tenant promptly cures the breach or if the violation did not cause significant harm to the landlord.

Tenants can only seek relief from forfeiture once with respect to each particular breach of the lease (Law and Equity Act, R.S.B.C. 1996, c. 253, s. 28). In addition, tenants must act with extreme urgency to apply to the court for relief from forfeiture to increase their chances of obtaining such relief. If a landlord terminates the lease, and then rents the premises to an innocent third-party tenant before the original tenant files for relief, the court is highly unlikely to reinstate the original lease as it would usually be unfair to the new tenant.

The Three-Part Test

To decide whether a commercial tenant qualifies for relief from forfeiture, BC courts generally apply a strict three-part test:¹

1. The Conduct of the Applicant: Did the tenant act reasonably and in good faith? Courts may deny relief to tenants who willfully breached the lease, misled the landlord, or possess a long history of flagrant defaults.
2. The Gravity of the Breach: Was the violation minor or severe? Paying rent a few days late is viewed differently than more severe breaches, such as using the property for illegal activities.
3. The Disparity Between Property Value and Damage: Will the landlord suffer immense financial harm or continued risk if the lease continues? Conversely, will the tenant lose their entire livelihood, including valuable tenant improvements, over a minor oversight that resulted in a breach of the lease?

Despite the above test, recent cases have shown that no single factor is determinative, and the courts will use a flexible approach to consider whether reinstating a commercial tenancy will be just and fair in all circumstances.

Relief in the Context of Commercial Lease Renewals

One situation in which relief from forfeiture may be sought is when a lease contains a right of renewal, but where the tenant has failed to strictly comply with the terms of that renewal option. The leading BC case on relief from forfeiture in this context is Clark Auto Body Ltd. v. Integra Custom Collision Ltd. (“Clark Auto Body”).² In this case, the court held that it could not assist the tenant in a situation where the tenant had the choice to exercise the renewal option and failed to comply with the strict requirements (or conditions precedent) to that option. The court reasoned that, in option to renew cases, if a tenant fails to properly exercise their option, they are not suffering a penalty or “forfeiture” of an existing tenancy but only failing to follow the process necessary to obtain a new one.

Other jurisdictions in Canada do not separate shortcomings in the exercise of renewals from other categories of default in terms of the availability of relief from forfeiture. The courts in Ontario have provided relief in circumstances where the tenant seeks to renew their lease but has not perfectly complied with the terms of the option to renew, and had valid reasons for not complying with strict terms of renewal.³

Courts in BC have also, despite the Clark Auto Body decision, recently found ways to assist tenants who have failed to properly exercise their option to renew. Even though relief from forfeiture may not be strictly available in the context of an option to renew, the courts may assist the tenant if the landlord’s “assertion of strict legal rights may be unjust or unfair.”⁴

For example, in a case where the parties had an unspoken agreement that they would renew the lease every set number of years without a written notice, the landlord was prevented from insisting on receiving such timely written notice of renewal on the basis of overall fairness.⁵ On these applications for relief from forfeiture, the court considers all relevant circumstances (including conduct by both landlords and tenants), and tenants must demonstrate “clean hands,” meaning that they acted in good faith and reasonably aside from the technical non-compliance with the terms of the renewal.⁶

Takeaways

Due to the availability of relief from forfeiture or other equitable relief to the tenants, landlords and tenants should be aware that the strict language of the lease will not always be the last word when a tenant breaches the lease. The courts may intervene to relieve a tenant from drastic consequences of termination in cases of technical non-compliance. As set out above, in order to provide assistance to the tenant, the Court will require otherwise good behavior on the part of the tenant, and will need to be satisfied that the fairness considerations should override the strict language of the lease.

Footnotes

1.Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co.,[1994] 2 SCR 490.

2.2007 BCCA 24.

3. See 8750297 Canada Inc. v Ambassador Reality Inc., 2025 ONSC 5479 and 2159117 Ontario Inc. o/a Meaty Eats Inc. v. Cheng, 2026 ONSC 5294.

4.S.E. Fraser Enterprises Ltd. v. W & W Parker Enterprises Ltd.,2009 BCSC 1347 at para. 57, aff’d 2010 BCCA 201.

5.Sechelt Golf & Country Club Ltd. v. District of Sechelt, 2012 BCSC 1105 at para. 128.

6.2324702 Ontario v. 1305 Dundas,2019 ONSC 1885 at para. 17.