Remedies for Non-Performance of Lease Obligations

Overview

When a party to a lease (louage) fails to perform its obligations, Quebec civil law provides an array of remedies to the aggrieved party. Article 1863 of the Civil Code of Quebec (CCQ) serves as the general umbrella provision, grouping the judicial recourses available to both the lessor (locateur) and the lessee (locataire). These recourses include specific performance (exécution en nature), resiliation (résiliation), rent reduction (diminution de loyer), and damages (dommages-intérêts). In addition, certain situations allow for extrajudicial remedies, where the lease terminates by operation of law or by private notice without court intervention. The regime differs between non-residential and residential leases (bail de logement), because many provisions protecting residential tenants are of public order (ordre public) and cannot be contracted out of.

Learning Objectives

• Identify the judicial and extrajudicial remedies available under art. 1863 CCQ when lease obligations are breached.
• Distinguish between rules applicable to all leases and rules specific to residential leases.
• Explain the conditions for obtaining specific performance and the circumstances under which courts will refuse it.

Judicial Remedies

Article 1863 CCQ consolidates the available judicial recourses. Both parties may seek specific performance, resiliation or damages when the other party fails to perform. Rent reduction is a remedy available to the lessee. In a non-residential lease, parties may contractually waive certain remedies under art. 1863 CCQ, including rent reduction or resiliation, subject to applicable limits on contractual clauses and good faith. Whether such waivers are enforceable depends on the circumstances, but in the residential context these waivers are generally ineffective because of the protective regime of art. 1893 CCQ.

Specific Performance

Under art. 1863 CCQ, a party may obtain specific performance "in cases that permit it." The court orders the defaulting party to carry out the obligation, usually by way of injunction or a mandatory order (ordonnance de faire ou de ne pas faire).

Four limitations restrict availability. First, specific performance is refused where the work is physically impossible, for instance where the building structure or soil conditions prevent the required repairs. Second, performance will be denied if it would infringe the rights of a third party without sufficient justification. Courts have declined to order a lessor to deliver premises to a lessee with a valid right when those premises have already been delivered in good faith to another lessee. Third, courts may refuse specific performance where the complexity of the required work makes judicial supervision impractical. Fourth, the order cannot require the personal and individual intervention of the person against whom it is directed, although where the debtor is a legal person, a subcontractor may be engaged.

Illustration. A shopping centre lessee who has signed a continuous-operation clause (clause d'exploitation continue) closes its store during mall hours. The lessor seeks a mandatory injunction to compel the lessee to maintain commercial operations during the hours specified in the lease. Courts have recognized that a mandatory injunction may be granted in these circumstances, because an appropriate tenant mix (éventail de locataires) is commercially significant for the lessor and other occupants.

Resiliation of the Lease

Under art. 1863 CCQ, resiliation requires a breach causing serious prejudice, subject to the special residential non-payment rule discussed below. The seriousness of the harm must be assessed in context. The apparent importance of the breached covenant alone does not settle the question: a relatively minor fault can cause substantial loss of enjoyment (JurisClasseur, Contrats nommés I, fasc. 20, paras. 123–125).

For an immovable lease, harm to other occupants can also be considered. The defence of non-performance is a separate remedy: art. 1591 requires a substantial failure of a correlative obligation and proportionate withholding, rather than allowing any breach to justify withholding all rent (fasc. 20, para. 143).

Both obligations must be exigible. Withholding is unavailable if the law, the parties' agreement or usage requires the party invoking the defence to perform first (art. 1591 CCQ).

Resiliation for Failure to Pay Rent

Rules applicable to all leases. Under art. 1883 CCQ, a lessee who is sued for resiliation for non-payment of rent may avoid the resiliation by paying the rent owed, together with interest and costs, before judgment. This statutory right to avoid resiliation protects continuation of the lease. In the leading commercial-lease decision 9051-5909 Québec inc. c. 9067-8665 Québec inc., Chamberland J.A. suggested that a lessee might validly waive this right. Any waiver must be assessed from its wording and the commercial lease context.

The maximum interest rate that the lessee must pay to avoid resiliation is the rate set by section 28 of the Tax Administration Act (Loi sur l’administration fiscale). Under art. 1893 CCQ, this cap is mandatory for residential leases. The parties may agree to a different rate, provided it is lower than the statutory rate.

Rules specific to residential leases. JurisClasseur discusses decisions interpreting payment before judgment by reference to when the tenant actually learned of the decision (Contrats nommés I, fasc. 28, para. 49). The tenant should pay effectively before judgment and should not assume that a later appeal restores a missed opportunity to cure.

In residential leases, the lessor may also obtain resiliation where the lessee is more than three weeks late in paying rent (art. 1971 CCQ). The lessor need not prove serious prejudice for that ground, but must prove the unpaid rent and delay. The tenant may raise a valid defence or pay under art. 1883 before judgment; eviction requires the appropriate judgment and lawful execution. Paying the arrears does not automatically defeat a separate claim based on frequent late payments causing serious prejudice (JurisClasseur, Contrats nommés I, fasc. 28, paras. 48–52).

A practical caution arises where a lessor cashes a rent cheque for a period after the date of resiliation and the eviction order, without expressing any reservation. This conduct may amount to recognition of the lessee's right to remain in the premises and a waiver of the lessor's right to eviction.

Worked Example: Residential Rent Arrears and Statutory Right to Avoid Resiliation

Factual Scenario

Hypothetical example. A dwelling tenant owes $1,100 monthly on the first day of the month. The October rent is unpaid. On October 24, the lessor seeks resiliation for a delay exceeding three weeks. Before judgment, the tenant pays all October and November rent then due, together with the required interest and costs.

Resiliation for Other Causes

Rules applicable to all leases. Any breach that causes serious prejudice to the other party may ground a demand for resiliation, subject to proof of the seriousness of the prejudice at the hearing on the initial application (art. 1863 CCQ).

Rules specific to residential leases. Where a residential lessee frequently delays rent payments and the lessor suffers serious prejudice as a result, the lessor may seek resiliation (art. 1971 CCQ). The serious prejudice may be pecuniary, such as difficulty meeting mortgage payments, or non-pecuniary, such as unusually burdensome collection efforts. Ordinary inconvenience from managing a rental property is insufficient. It may also be factual or legal in nature.

A distinctive feature of the residential regime under art. 1973 CCQ is the court's discretion, when resiliation is sought for a cause other than rent unpaid for more than three weeks, to order the debtor (whether lessor or lessee) to perform its obligations rather than resiliate the lease immediately. If the debtor fails to comply with the performance order, the creditor may then apply for resiliation without further proof of serious prejudice (art. 1973, al. 2 CCQ).

The order must be sufficiently precise. Its duration, any renewal of the lease and compliance are assessed from its terms and the evidence. A subsequent resiliation application still requires proof of an actual breach of the order; conduct attributable to the lessor or circumstances establishing compliance must be considered (JurisClasseur, Contrats nommés I, fasc. 28, paras. 43–45).

Resiliation by a Syndicate of Co-owners

In a divided co-ownership (copropriété divise), the syndicate of co-owners has standing to seek resiliation of a lease affecting a private portion when the lessee's breach causes serious prejudice to a co-owner or another occupant of the building (art. 1079 CCQ). The syndicate must give prior notice to both the lessor and the lessee. Jurisdiction over the application lies with the courts of general jurisdiction or with the TAL, depending on whether the lease is residential or non-residential.

Rent Reduction

Where the lessee's enjoyment (jouissance) of the leased property is diminished, the lessee may apply for a rent reduction. This remedy is an application of the right to a proportional reduction of the correlative obligation under art. 1590 CCQ. Once the lessor performs the obligation, the rent is restored to its full amount for the future.

The lessee should give the lessor a demand letter (mise en demeure) and a reasonable opportunity to correct the default. A separate demand is unnecessary where the debtor is already in default by operation of law. The effective period and amount of the reduction depend on the proven loss of enjoyment and the applicable notice rules (JurisClasseur, Contrats nommés I, fasc. 20, paras. 128–132.1).

Self-Help Performance in Place of the Lessor

The lessee may apply to the court for authorization to carry out repairs or improvements that the lessor is legally obligated to make but has neglected (art. 1867 CCQ). In the residential context, the lessee's right is broader: the lessee may seek authorization to remedy any default whatsoever by the lessor, not only a failure to make repairs (art. 1907, al. 1 CCQ).

For urgent and necessary repairs or expenses to preserve the property or ensure enjoyment, art. 1868 CCQ allows intervention without prior judicial authorization after informing or attempting to inform the lessor, who fails to act in time. Only reasonable expenses qualify; the lessee must account for the work and supporting documents under art. 1869, and the lessor may resume control of the work (JurisClasseur, Contrats nommés I, fasc. 20, paras. 140–142).

Rent Deposit

In a residential lease, the lessee may obtain judicial authorization to deposit rent when the lessor fails to perform its obligations (art. 1907, al. 2 CCQ). This mechanism allows the lessee to protect itself against a resiliation claim for non-payment while maintaining pressure on the lessor to perform.

A procedural prerequisite applies: the lessee must give the lessor a written notice of ten days indicating the grounds for the proposed deposit before applying to the TAL. This notice affords the lessor a final opportunity to remedy its default. If the lessor does not comply within the ten-day period, and the TAL is satisfied that the grounds are serious, it will fix the amount and conditions of the deposit (art. 1907, al. 2 CCQ).

The lessee must deposit the rent at each due date. Failure to do so exposes the lessee to resiliation for being more than three weeks late or for causing serious prejudice through frequent delays (art. 1971 CCQ).

Separately, art. 1908 CCQ permits rent deposit where the tenant is uncertain of the person entitled to receive rent or the lessor refuses payment.

Rent deposit versus the defence of non-performance. The rent deposit mechanism and the defence of non-performance under art. 1591 CCQ must be distinguished. The two remedies serve complementary purposes. The defence of non-performance under art. 1591 CCQ permits a party to withhold its correlative obligation, but only to an extent corresponding to the co-contracting party's default. A lessee who withholds more rent than is proportionate to the lessor's default risks resiliation of the lease. A rent deposit protects payment of the instalments actually deposited in accordance with the authorization. It does not erase prior arrears, excuse missing deposits or prevent a claim based on another breach.

The sums deposited may be remitted to the lessor once the lessor has performed its obligations, or to the lessee to allow the lessee to carry out the work (art. 1909 CCQ). The lessee must not undertake repairs without authorization (except in an emergency), or the retention of rent in compensation will not be recognized.

Damages

Damages may be sought alone or with a compatible remedy under art. 1863 CCQ. They compensate proven loss under the general rules of liability, causation and mitigation; the same loss cannot be recovered twice through damages and rent reduction (JurisClasseur, Contrats nommés I, fasc. 20, paras. 110–115 and 130).

Punitive damages require a statutory basis. Since the 2024 amendment, art. 1917 CCQ expressly permits them, on the tenant's application, when the dwelling has become unfit for habitation because of the lessor's negligence. They are not automatic whenever repairs are overdue. Civil Code, art. 1917.

Extrajudicial Remedies

Certain situations allow the lease to be terminated without judicial proceedings. These operate either by operation of law (de plein droit) or through contractual mechanisms in non-residential leases.

Resiliation by Operation of Law

Among the statutory grounds for resiliation by operation of law in residential leases are the following:

1. The lessee refuses to take possession of a dwelling delivered in a condition unfit for habitation (impropre à l'habitation) (art. 1914 CCQ).
2. After an abandonment because the dwelling is unfit, the lessee has failed to provide a new address or, after notice that the dwelling is habitable again, to notify the lessor within ten days of an intention to return (art. 1916 CCQ).
3. Article 1975 CCQ addresses a lessee who leaves without justification and takes their personal effects. The facts must show a definitive abandonment and a manifest intention to cease assuming the lease obligations.

Once resiliation is established in that situation, the lessor can seek a replacement tenant to limit lost rent. The departure and its legal consequences must therefore be established before damages are calculated.

Resiliation for Violence or Sexual Aggression

Article 1974.1 CCQ permits a residential tenant to resiliate when sexual violence, conjugal violence or violence toward a child living in the dwelling threatens the safety of the tenant or child. The notice must include an attestation by a designated public officer or public servant. The current provision permits that attestation to rely on a judgment establishing violence, or on the tenant's sworn declaration supported by the prescribed factual material.

Resiliation normally takes effect two months after notice is sent. The period is one month for an indeterminate lease or a lease shorter than twelve months; a lease of exactly twelve months requires two months. It may take effect earlier by agreement or if the vacated dwelling is relet during the notice period. Civil Code, art. 1974.1, TAL notice form.

Contractual Resolutory Clauses in Non-Residential Leases

Earlier appellate case law refused to apply art. 1605 CCQ to rent non-payment because doing so would defeat the tenant's art. 1883 CCQ right to cure before judgment. The later 9051-5909 Québec inc. decision distinguished that approach where the lease clearly contained a resolutory clause.

Non-residential leases frequently include clauses stipulating that the lease is resiliated by operation of law (de plein droit) upon default by the lessee, particularly for non-payment of rent. The Quebec Court of Appeal addressed these clauses in 9051-5909 Québec inc. c. 9067-8665 Québec inc., where Chamberland J.A. upheld the validity of such clauses but warned that the lessor who invokes a resolutory clause erroneously, or who exercises the right in bad faith, may incur liability. A notice period that is too short, for example, may constitute a fault in the manner of exercising the right. The clause does not permit forcibly retaking the premises or secretly changing locks; a disputed eviction requires judicial intervention (JurisClasseur, Contrats nommés I, fasc. 23, paras. 25–27).

A residential clause providing automatic resiliation for a breach is without effect. For non-payment defaults, arts. 1893 and 1883 CCQ together preserve the lessee's right to avoid resiliation by paying before judgment. For other defaults, arts. 1893 and 1863 CCQ require proof of serious prejudice, and art. 1973 CCQ preserves the court's discretion to order performance rather than resiliation. Those contractual clauses cannot replace the statutory residential protections; the statutory notice-based and automatic grounds described above remain available.

Notice of Default and Demand Letters

Article 1594 CCQ distinguishes default resulting from an express contractual stipulation, an extrajudicial demand, judicial proceedings and operation of law. Under art. 1597, default can arise, for example, when an obligation could only usefully have been performed within an elapsed period, when urgent performance is required or when the debtor clearly refuses to perform.

A commercial lease may provide for default through the passage of time, but reaching a payment date does not automatically satisfy every ground in art. 1597. The demand and notice requirements governing the particular remedy must be checked. Written notice also helps establish the default and the opportunity to correct it. Rent deposit under art. 1907 requires its particular ten-day prior notice. Civil Code, arts. 1594–1598 and 1907.

Jurisdictional Competence

Lease disputes are distributed among three forums. Under art. 35 of the Code of Civil Procedure, the Court of Quebec has exclusive jurisdiction where the amount in dispute or the value of the subject matter, including for resiliation claims, is less than $75,000. Jurisdiction is concurrent with the Superior Court (Cour supérieure) where the amount is at least $75,000 but less than $100,000. Claims of $100,000 or more fall within the exclusive jurisdiction of the Superior Court.

For residential leases, these rules must be read alongside section 28 of the Act respecting the Administrative Housing Tribunal (Loi sur le Tribunal administratif du logement), which grants the TAL exclusive first-instance jurisdiction over residential lease applications where the amount or value does not exceed the upper limit of the Court of Quebec's concurrent jurisdiction.

Section 28 also assigns specified matters to the TAL without that monetary limit and permits certain orders or authorizations under arts. 1863, 1867, 1917 and 1918 CCQ above it. The Superior Court has exclusive jurisdiction over injunctions under art. 33 C.C.P.; the Court of Quebec can nevertheless order specific performance accessory to a claim within its jurisdiction under art. 35. A request for a TAL order and an application for a Superior Court injunction must therefore be distinguished. C.C.P., art. 35, TAL Act, s. 28.

Worked Example: Commercial Continuous-Operation Clause and Mandatory Injunction

Factual Scenario

Hypothetical example. An anchor tenant promises to operate throughout a shopping centre's opening hours. It closes the store but continues paying rent. The lessor seeks a mandatory injunction requiring it to reopen, relying on the express covenant and evidence that the closure harms neighbouring businesses.

Practice Checklist

• Identify whether the lease is residential or non-residential, as the applicable regime differs substantially.
• Verify whether art. 1863 CCQ recourses have been waived by contract (valid only for non-residential leases).
• Send a demand letter (mise en demeure) before initiating judicial proceedings, unless a contractual clause or the circumstances of art. 1597 CCQ render it unnecessary.
• For resiliation claims, assess whether the breach amounts to serious prejudice on an objective standard; consider the impact on other building occupants for immovable leases.
• For non-payment resiliation in residential leases, determine whether the lessee is more than three weeks late (art. 1971 CCQ) and whether the lessee may invoke art. 1883 CCQ before judgment.
• Before withholding rent using the defence of non-performance, evaluate whether the amount withheld is proportionate to the lessor's default; consider the rent deposit mechanism as a safer alternative.
• For a residential lessee seeking a rent deposit, confirm that the ten-day prior written notice to the lessor has been sent (art. 1907, al. 2 CCQ).
• When acting for a co-ownership syndicate, ensure prior notice has been given to both lessor and lessee before seeking resiliation under art. 1079 CCQ.
• Confirm which tribunal or court has jurisdiction: TAL for most residential disputes, Court of Quebec or Superior Court for non-residential disputes depending on the amount.
• Advise lessors not to cash post-resiliation rent cheques without an express reservation, to avoid an implied waiver of the right to eviction.