One of the most difficult and common problems faced by a landlord is a tenant who is unable or unwilling to pay rent. Under s. 104 of the Alberta Civil Enforcement Act, a landlord may seize the personal property of a residential or commercial tenant in order to secure the landlord’s claim for unpaid rent under the lease (although seizure is typically much more effective in a commercial context). This is called the landlord’s “right of distress.”
Benefits of Seizure
Besides enhancing a landlord’s leverage over a delinquent tenant, the right of distress provides a landlord with a number of important benefits:
- A landlord may sell tenant property seized pursuant to the right of distress without a court order.
- A landlord who exercises its right of distress has priority over unsecured creditors.
- A landlord who exercises its right of distress also has priority over a secured creditor whose security interest has not been registered in the Personal Property Registry prior to the seizure.
- The landlord’s right of distress arises as soon as rent is late (as defined by the lease).
- A landlord does not have to provide a tenant with any notice prior to exercising its right of distress.
Distress is a traditional common law remedy and the general rules respecting the right of distress are similar across Canada. However, Alberta is unique in folding the right of distress into its general civil enforcement scheme. A chief consequence of Alberta’s codification of the right of distress is that any seizure of tenant property by a landlord in Alberta must be conducted through a civil enforcement agency. In conducting the seizure, the civil enforcement agency must employ the services of a civil enforcement bailiff acting pursuant to a warrant of distress. Landlord’s should also keep in mind the following:
- At the time of a seizure, the tenant must be provided with a Notice of Objection to Seizure and Information for Debtor form (the “Objection Form”). The tenant can object to the seizure of some or all of their property by filling out the Objection Form.
- If the tenant objects to the seizure of property, the seized property cannot be sold without a Court’s permission. However, a tenant who lacks a valid reason for objecting to the seizure may be required to pay a landlord’s court costs.
- In the context of a residential lease, the landlord may seize: a) personal property of the tenant provided such property is located on the leased premises at the time of seizure; and b) personal property of any relative of the tenant provided such property is located on the leased premises at the time of seizure, and the relative is also living with the tenant at the time of seizure.
- In the context of both commercial and residential leases, the landlord must be careful not to wrongfully seize the property of innocent third parties.
Do I have the right to seize?
- There must be a valid lease.
- The landlord CANNOT seize for rent after the lease has been terminated. Distress must be used before termination of a lease. Typically, commercial leases will allow the landlord to take back the premises without terminating the lease. Your legal counsel can advise on the specific rights and remedies under your lease.
- The tenant must be “in arrears” before the landlord can seize.
- If the applicable lease states that accelerated rent is collectable as rent then the landlord may seize for that accelerated rent. This also applies to common costs and other lease charges.
- The landlord must comply with the terms of the lease and also with the common law. Seeking the advice of legal counsel before proceeding with seizure is advisable.
Should I seize?
- The landlord should make a determination of the value of the goods to be seized and consider whether it warrants the costs of seizure. There should be sufficient value in the property at forced sale prices to at least cover seizure and sale costs (as a rule of thumb, the landlord will want a minimum of $5000 worth of goods to cover off the legal and civil enforcement costs).
- Distressed property typically receives a fraction of its initial value at forced auction. If there is not enough value in the seized goods the seizure process will cost the landlord more than can be gained through the seizure.
- There are special exemptions for certain goods (food, clothing, appliances, etc.) that apply to residential tenancies which should be considered.
- Seizure costs vary but at minimum generally start in the $750 to $1000 range. In addition, there will be costs for the locksmith, the bailiff’s time, mileage, removal costs and storage costs.
- The tenant’s property must be on the rental property for bailiff to seize it. The bailiff is not allowed to seize the personal property of others that may be on the site at the time of the seizure.