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REAL ESTATE Unintended L andlords may end up with unwant- ed tenants and unpaid rent as a result of recent changes to Canada's bankruptcy and insolvency laws. The changes, which flew under the radar of many real estate lawyers, unnoticed even by some experts in property law, were part of a package of amendments to the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act enacted in September 2009. The wording leaves room for interpretation and they have yet to be tested in court, but the amend- ments appear to have given bankruptcy trustees the right to assign leases if a tenant goes bankrupt — a departure from existing case law that could have consequences Landlords may be the big losers as a result of recent changes to Canada's bankruptcy and insolvency laws. BY K EVIN MARRON significant implications, particularly for shopping mall owners. "The long and the short of it is that it is expected that landlords are not going to be faring so well," says Joseph Grignano, a partner in the real estate group at Blake Cassels & Graydon LLP. Before the federal government enacted the amendments, courts would consider the provisions of provincial tenancy laws in determining whether and how leases could be assigned to new tenants when an existing tenant declares bankruptcy. While the legisla- tion and case law differed from prov- ince to province, landlords had some level of comfort that the terms of their leases would not be drastically altered and they would not be saddled with an unsuitable tenant. In Ontario, prior to the amend- ments, the courts wouldn't change the use that the property was being put to, says Grignano. So, for example, if a shoe store went bankrupt, the lease would not be assigned to a dollar store. But the amendments give the courts much broader powers. The interests of landlords may be offset by concerns for other creditors and for the greater good. A tenant might argue that hundreds of jobs would be saved by assigning the lease in a certain way and the courts could take that into account. Landlords are concerned that they will be stuck with a new tenant or a www. C ANADIAN Law ye rmag.com SEPTEMBER 2010 15 KATHRYN JANKOWSKI