Strategic Execution for Recovery of Rent Arrears
This memorandum outlines the practical steps your organization should follow to effect distraint against a commercial tenant in arrears. Distraint is a powerful common law remedy, codified in Saskatchewan under The Landlord and Tenant Act and The Distress Act, allowing landlords to seize and sell tenant assets to recover unpaid rent. While effective, it must be executed with precision to avoid legal exposure.
INITIAL CONSIDERATIONS
Before initiating distraint, confirm the following:
- Rent Arrears Exist: Distraint is only available where rent is unpaid. Review the lease to ensure the arrears qualify as “rent,” which may include other financial obligations defined as such.
- Lease Terms: Examine the lease for clauses that modify common law distraint rights, including timing or notice requirements.
- Timing Rules:
- Do not distrain on the day rent is due (arrears begin at midnight).
- Distrain only during daylight hours.
- Avoid distraint on Sundays.
Step 1: Confirm Tenant Identity and Asset Ownership
Begin by verifying the legal identity of the tenant. If the lease was signed by an individual but the premises are now occupied by a corporation, and no assignment was documented, distraint may be invalid. You must ensure that the assets belong to the party liable under the lease.
Conduct a search of the Personal Property Registry (PPR) to identify any Purchase Money Security Interests (PMSIs) or other encumbrances. Distraint cannot override a valid PMSI. If PMSIs are registered:
- Assess whether the creditor truly holds a PMSI (i.e., funds were used to purchase the specific assets).
- Determine whether the assets remain in the tenant’s possession.
- Estimate the remaining debt secured by the PMSI.
Avoid contacting the creditor before seizure, as this may prompt them to seize first and gain priority. Instead, proceed with distraint and notify the creditor only after assets are inventoried.
Step 2: Prepare Documentation
The following documents must be prepared:
- Warrant to Bailiff: Authorizes the bailiff to act on your behalf and includes indemnity. (See Schedule “A”)
- Demand Letter to Tenant: provide the tenant with notice of the distress. (See schedule “B”).
- Notice of Distress: Lists arrears and assets seized; signed and served by the bailiff. (See Schedule “C”)
- Undertaking (if applicable): Used in a “walk-in distraint” where goods remain on-site. (See Schedule “D”)
Step 3: Engage the Bailiff
Coordinate with a licensed bailiff and provide:
- Lease details and arrears
- PPR search results
- Description of assets to be seized
- Preferred timing for entry (typically early morning or after business hours)
Ensure the bailiff liaises with your property manager and understands the scope of the seizure.
Step 4: Execute the Distraint
The bailiff will:
- Enter the premises during daylight hours.
- Serve the Notice of Distress to the person in charge or post it if no one is present.
- Conduct an immediate inventory of seized goods and provide a copy to the tenant.
Important considerations:
- Scope of Seizure: Seize only what is reasonably necessary to cover arrears and costs. Estimate forced sale value—typically 25–33% of retail for goods.
- Security of Goods: If goods remain on-site, change locks to secure them. Clarify in writing that this is not a re-entry or termination of lease.
Step 5: Sale and Disbursement
Once distraint is complete:
- Proceed to sell the seized goods unless the tenant pays arrears.
- Disburse proceeds in the following order:
- Bailiff and legal costs
- Rent arrears
- Surplus (if any) to the tenant
If a PMSI holder asserts priority, consider negotiating cost recovery before releasing goods.
Step 6: Post-Distraint Considerations
- Tenant Bankruptcy: If the tenant assigns into bankruptcy before sale and disbursement, the distraint is void and assets must be turned over to the Trustee.
- Fraudulent Removal: If the tenant removes goods to avoid distraint, you may distrain within 60 days wherever the goods are found and sue for double their value under Section 30 of The Landlord and Tenant Act.
Please contact our office prior to initiating distraint to ensure full compliance with statutory and procedural requirements. We will assist with document preparation, bailiff coordination, and legal oversight throughout the process.
*The law may have changed since this article was first published. You should consult with your lawyer to confirm the current state of the law*
For further information please contact:
| Denim R. Martyn Direct Line: (306) 477-7261 Email: dmartyn@cuelenaere.com |
Please note: the following schedules are for reference only. The forms provided should not be relied upon without legal advice.
SCHEDULE “A”
WARRANT TO BAILIFF
TO: THE BAILIFF COMPANY
I, being the Landlord of the premises known as __________________, Saskatoon, Saskatchewan, leased to [tenant] by agreement in writing dated _________, 2025, hereby engage you as Bailiff on my behalf and authorize and require you or your servants or agents to re-enter the premises and take possession of them on my behalf because of the Tenant’s breach of the lease by failing to pay rent, now in arrears in the amount of $X.
I hereby agree to indemnify you, your bailiff or agents against any and all claims which may be made against you under this authority and to defend any action brought against you in respect thereof.
AND FOR SO DOING, this shall be your full and sufficient warrant and authority.
DATED at Saskatoon, Saskatchewan this 7th day of November, 1988.
LANDLORD HOLDINGS LTD. Per: _________________________________