Assigning a commercial lease when you sell or buy a business in Saskatchewan

When a Saskatchewan business changes hands, the premises lease may have to change hands with it. The lease is a contract and its wording is the starting point. BDC’s guide to commercial lease terms says it is always best to have your lawyer, preferably one specializing in commercial real estate, review your agreement before you sign. In Saskatchewan, The Landlord and Tenant Act (RSS 1978, c L-6) and The Distress Act (RSS 1978, c D-31) then add rules on consent, distress, a tenant’s trustee and overholding. The King’s Printer versions cited here are consolidations that the Printer describes as not official. This page covers Saskatchewan only. It explains what the Acts say in their own terms so that a seller and a buyer know what to ask. It does not say what your lease means.

The consent proviso in section 13

Section 13 of Saskatchewan’s Landlord and Tenant Act covers every lease containing a covenant, condition or agreement against assigning, underletting, parting with the possession, or disposing of the land or property leased without licence or consent. That covenant is deemed subject to a proviso that the licence or consent shall not be unreasonably withheld. The deeming does not apply if the lease contains an express provision to the contrary. A reader of section 13 will not find a court-application procedure for a refusal in that section, so a refused seller or buyer should get legal advice about the options. The national answer on landlord consent to a lease assignment sets out the general steps.

What a licence covers, and what relief does not

Section 14 says that, unless otherwise expressed, a licence extends only to the permission actually given, or to any specific breach of a proviso or covenant, or to the actual assignment, under lease or other matter. The practical point is to read the consent for what it names. A consent to one assignment is not a general release. Separately, section 10 deals with relief against forfeiture, and section 10(9)(a) says that section does not extend to a covenant or condition against the assigning, under letting, parting with the possession, or disposing of the land leased. Relief that may be available for some breaches is therefore not what section 10 offers for an unconsented assignment.

Distress and the goods in the premises

Distress is a landlord’s seizure of goods for unpaid rent. Under section 20 of The Landlord and Tenant Act, a person with rent in arrear may distrain for the arrears after a lease ends if the distress is made within six months after the determination of the lease, during the continuance of the landlord’s title or interest, and during the possession of the tenant from whom the arrears became due. Section 25(1.1) says no landlord shall distrain on the goods of any person except the tenant or the person liable for the rent, even though the goods are found on the premises. Section 25(2) lists exceptions, including a title derived from the tenant by a security agreement, other than one creating a purchase-money security interest. Section 27 lets a tenant set off against rent a debt the landlord owes. The Distress Act, in section 2.1, allows only the costs set out in its first schedule.

Wages and a tenant’s trustee

Where goods on premises a tenant occupies for business purposes are distrained for rent, section 36 of The Landlord and Tenant Act gives a person employed by the tenant on the premises on the day of the distress, or at any time in the three months before, a lien on the moneys realized from the sale for unpaid wages or salary, subject to the limit in that section, if that person files a claim as the section requires. For a buyer, that is a reason to ask about unpaid wages at the premises. If a receiving order or assignment in bankruptcy is made against or by the tenant, section 43 ends the landlord’s right to distrain on those goods from the date of the order or authorized assignment, with a limited priority payment to the landlord. Section 47(1) lets the trustee, despite any provision in the lease and subject to the conditions in that section, elect to retain the premises and, on paying all overdue rent, assign the lease to a person who covenants to observe and perform its terms, meets the section’s condition on the business to be carried on, and is approved by the court. The federal Bankruptcy and Insolvency Act, in section 30(1)(k), lets a trustee, with the permission of the inspectors, elect to retain or to assign any lease of property of the bankrupt.

When a tenant will not leave

Part IV of the Act covers overholding. Where a tenant whose lease has expired or been determined wrongfully refuses or neglects, on a written demand for possession in the form the Act sets out, to go out of possession, the landlord may apply by notice of motion to a judge of the Court of King’s Bench for an order for a writ of possession. Under section 50(4) of the Act, the hearing is not sooner than the sixteenth day after service of the demand. Under section 52(3), the judge shall not proceed unless it is shown by affidavit that no Provincial Mediation Board order prohibiting the proceedings has been filed with the local registrar. A buyer taking over a lease on a short or expired term should know that this is the route the Act gives a landlord.

What to ask for before closing

• The lease and every amendment, with the assignment clause marked and a note of whether it expressly displaces the section 13 proviso.
• The landlord’s written consent, naming the assignment it covers, in line with section 14.
• A Personal Property Registry search on the tenant, so that security interests in the goods on the premises are known.
• Confirmation from the seller about any unpaid wages and any set-off or debt between the tenant and the landlord.
• Written confirmation from the landlord about rent owing at closing.

The national page on what happens to the commercial lease when you buy a business and the guide to buying a business in Saskatchewan put these steps in a wider checklist.