Legal Blog

Illegal Distress

Distress must be levied in strict accordance with the Landlord and Tenant Act; otherwise it is illegal or irregular and the landlord is subject to damages. The case of Falwyn Investors Group Ltd. v. GPM Real Property (6) Ltd., a 1998 unreported decision of the Ontario Court (General Division) is a case in point.

Truncated Facts

The tenant was in arrears of rent on three occasions. On each occasion, the landlord’s bailiff changed the locks on the premises. At the same time, the bailiff posted a notice stipulating that the landlord was distraining all goods, the tenancy was not being terminated, and the tenant could have access to the premises upon request. On the first two occasions, the tenant paid some money and the landlord discontinued the distress. On the third occasion, the landlord sold the goods and, three months later, re-rented the premises at a higher rent.

The tenant had a number of complaints with the process but we will deal only with the two that we find of interest.

Termination

The tenant complained that by changing the locks, the landlord terminated the tenancy and, since distress can only be carried out as part of a landlord-tenant relationship, the distress was illegal. The judge held that although changing the locks was significant, other factors were important in determining whether the landlord intended to terminate the tenancy. The judge considered the notice, which the landlord specifically stated that the tenancy was not being terminated, and commented that the form of this notice had been given judicial approval in three prior cases. The judge further noted that the landlord had commenced distraint proceedings in a similar fashion on two prior occasions without complaint by the tenant. Accordingly, the judge held that there was no termination of the lease and that the distress was not illegal.

This analysis glosses over what takes place in practice. The bailiff moves in, posts the notice referred to, and then does not give ready access to the tenant. What the tenant ought to do in those circumstances is demand a key. In the alternative, the tenant should request immediate access. If access is delayed, it should make note of it. Once the tenant gains access, it should remain in the premises for hours at a time. Sooner or later, the bailiff will tire of the game and order the tenant out of the premises. At that point, the tenancy will be terminated.

Irregular Distress

The Act sets out a procedure whereby two independent appraisers must evaluate the distrained goods before the landlord sells them. The appraisers must not appraise the goods until 5 days after their seizure.

In the present case, the appraisers valued the goods before the elapse of the 5-day replevy period. The appraisers were told to give a “down and dirty appraisal”. One came in at $10,000 and the other at approximately $18,750. The second appraiser admitted in evidence that the goods were probably worth 25% more than the value at which he appraised them. Even worse, the landlord sold the goods to the first appraiser for $10,000.

The trial judge had no problem in categorising this process as an irregular distress, entitling the tenant to damages. However, the judge was not impressed with the tenant’s ballpark figure of value and relied on the second appraiser’s evidence of a 25% lowball. On this basis, the judge awarded the tenant damages of $23,437. Further, the judge did not allow the landlord a credit for bailiff’s fees of $2,500.

Arrears

The judge calculated arrears of rent and damages for the breach of the lease. In the calculation, he deducted the increase in rent from the new tenancy but added the cost of leasehold improvement that the landlord had to make to obtain the new tenant. After deduction of the tenant’s damages, the judge awarded the landlord a judgment for $14,573.72. The judge held that success was divided on the claim and counterclaim and awarded no costs.