{"id":23351,"date":"2026-10-14T09:51:38","date_gmt":"2026-10-14T13:51:38","guid":{"rendered":"https:\/\/www.virtulexavocats.com\/?p=23351"},"modified":"2026-10-14T09:51:53","modified_gmt":"2026-10-14T13:51:53","slug":"commercial-lease-landlord-keeps-tenant-equipment-clause-void-quebec","status":"publish","type":"post","link":"https:\/\/www.virtulexavocats.com\/en\/commercial-lease-landlord-keeps-tenant-equipment-clause-void-quebec\/","title":{"rendered":"Commercial Leases: The Clause Letting the Landlord “Keep” Your Equipment Has Been Void Since 1994"},"content":{"rendered":"

Thousands of commercial leases in Quebec still contain a clause allowing the landlord to take over a defaulting tenant’s property. A recent judgment reminds us that the clause is worthless, and has been since the 1994 reform of the Civil Code.<\/em><\/p>\n

In April 2022, a franchisee of the Benny restaurant chain leases premises in a Laval real estate complex to open a restaurant. The lease runs twelve years. Two years later, in July 2024, the restaurant closes. The tenant removes some furniture with the landlord’s consent but leaves the heaviest equipment behind: two kitchen hoods, a walk-in cooler, a freezer, a fire-suppression system, dozens of chairs and tables. It hopes to sell them to the next occupant.<\/p>\n

In March 2025, the landlord terminates the lease and informs the tenant that it now owns everything left in the premises, under a clause of the lease. It then sues the tenant and its guarantor for more than $600,000 in rent. When the tenant learns, in October 2025, that the premises have been re-let and that a new restaurateur is presumably using its equipment, it has the equipment seized.<\/p>\n

In 9316-5363 Qu\u00e9bec inc. c. 9453-6455 Qu\u00e9bec inc.<\/em>, 2026 QCCS 1611, rendered on May 8, 2026 by Justice Catherine Martel of the Superior Court (District of Laval), the Court declares the tenant the owner of its equipment, yet annuls its seizure anyway. Both halves of the judgment deserve a closer look.<\/p>\n

The lease clause: a disguised “giving in payment”<\/h2>\n

The clause the landlord relied on is disarmingly ordinary. It provides that, if the tenant defaults, the landlord may take possession of the tenant’s property located in the leased premises, store it at the tenant’s expense, or sell it or otherwise dispose of it in any manner the landlord sees fit, without notice to the tenant. Anyone who has read a Quebec commercial lease will recognize the wording.<\/p>\n

The Court calls it what it is: a clause of dation en paiement<\/em>, or “giving in payment”. Giving in payment means settling a debt not with money but by transferring ownership of property. The clause amounts to saying in advance: “If you don’t pay your rent, your equipment becomes mine.”<\/p>\n

Article 1801 of the Civil Code of Qu\u00e9bec<\/em> could not be clearer: “Any clause by which a creditor, with a view to securing the performance of the obligation of his debtor, reserves the right to become the irrevocable owner of the property or to dispose of it is deemed not written.” “Deemed not written” means the clause is treated as if it had never existed. It is void from the outset, without any need to have it set aside.<\/p>\n

Justice Martel notes that this rule applies whenever a debtor undertakes in advance to transfer property to a creditor in case of default, regardless of the nature or purpose of the contract. Courts have applied it to leases, but also to shareholder agreements, deeds of sale, an emphyteutic lease and a co-ownership agreement. For commercial leases specifically, the Superior Court said so as early as 1994 in Investissement Limtor inc. c. Jedco Sporting Goods inc.<\/em>, and, the judgment observes, that reasoning has been consistently followed by later case law and endorsed by legal scholars.<\/p>\n

The landlord switches horses: the “end of lease” clause<\/h2>\n

Sensing the weakness of its first position, the landlord invoked at the hearing another clause of the lease: the one providing that property left in the premises “on the Lease End Date” becomes, at the landlord’s option, the landlord’s property.<\/p>\n

The Court reads the lease. The “Lease End Date” is defined there as the last day of the month in which the twelfth anniversary of the lease falls, that is, in 2034. The clause therefore covers property abandoned at the natural expiry of the lease; it does not allow the landlord to declare itself owner of the equipment when the landlord itself chooses to terminate the lease early. And the judge adds that if the clause were read as a penalty for the tenant’s default, it too would be a giving in payment deemed not written.<\/p>\n

The tenant, which had ordered and paid for the equipment, therefore still owns it.<\/p>\n

A bit of history: the landlord’s privilege, gone for more than thirty years<\/h2>\n

Why are these clauses still so common? Partly out of habit, and partly out of confusion with a regime that no longer exists.<\/p>\n

Under the former Civil Code of Lower Canada<\/em>, a landlord enjoyed a genuine “privilege” over the movables furnishing the leased premises: a right of preference over those goods, which the landlord could have seized quickly through a procedure known as saisie-gagerie<\/em>, in order to be paid out of the sale proceeds ahead of other creditors. That privilege never made the landlord the owner of the goods, but it gave the landlord a real hold over them. At the same time, clauses of giving in payment were, back then, generally valid.<\/p>\n

The reform of the Civil Code, in force since January 1, 1994, swept all of that away. The landlord’s privilege was not carried over, and article 1801 struck down clauses of giving in payment. Since then, a commercial landlord who wants security over a tenant’s equipment must obtain it expressly, through a movable hypothec (the Quebec equivalent of a chattel mortgage or security interest) registered in the Register of Personal and Movable Real Rights, and enforce it through the hypothecary remedies set out in the Code, with the prior notices and delays those entail. It cannot grant itself security through a general clause in the lease.<\/p>\n

Thirty-two years later, the wording nonetheless survives in a multitude of leases, often copied from pre-reform templates. Many landlords sincerely believe they can rely on it. Many tenants, unaware of their rights, walk away from valuable equipment. In this case, the tenant valued its equipment at roughly $360,000.<\/p>\n

The seizure annulled anyway: procedure is unforgiving<\/h2>\n

So much for the merits. But the judgment carries a second lesson, a procedural one, and it is a hard one for the tenant.<\/p>\n

Seizure before judgment is an exceptional measure that places property under the control of the court before the case has even been decided. Article 520 of the Code of Civil Procedure<\/em> requires that the instructions to the bailiff, supported by a sworn statement, “specially designate” the property to be seized when the seizure does not cover all of the defendant’s movables. The Court recalls that the formalities of seizure before judgment must be applied strictly.<\/p>\n

The tenant’s sworn statement identified five categories of goods in summary fashion: the terrace guardrail, a kitchen hood, a walk-in cooler and dining-room furniture, with a bundle of invoices attached. That was not enough for a bailiff to know what to seize. In practice, the bailiff had to be accompanied by a representative of the tenant who pointed out the items, and he ended up seizing a quantity of equipment that appeared nowhere in the sworn statement: roughly half of what was seized. The tenant’s own representative admitted at the hearing that he would have been unable to match the list of seized items against the invoices attached to his statement.<\/p>\n

This, the judge concludes, is a fundamental defect that invalidates the seizure. The tenant is declared owner, but its seizure is annulled and the landlord obtains its release. No legal costs are awarded either way, given the mixed outcome.<\/p>\n

Procedure serves the law, not the other way around<\/h2>\n

The landlord had also tried to have the tenant’s application declared inadmissible, arguing that the tenant should have filed a separate action to recover its property rather than proceeding by a simple application within the existing case. The Court acknowledges that the approach was unorthodox, but refuses to sanction a formal defect that deprived the landlord of no right: both parties were able to present all their evidence and arguments on ownership of the equipment. Ruling otherwise would offend the principle of proportionality and the well-known adage that procedure must be the servant of the law and not its master. The landlord’s claim that the tenant abused the process is also dismissed: seizing property you claim to own in order to gain negotiating leverage is not a misuse of the courts.<\/p>\n

Why this case stands out<\/h2>\n

Not because the rule is new: it is more than thirty years old and the case law is consistent. Precisely for that reason. It is striking that in 2026, a commercial landlord, advised by counsel, built its position on a clause the courts have been striking down since 1994, and that it took a Superior Court judgment to say so again. The gap between the law and everyday contract drafting is, here, wide open.<\/p>\n

The judgment is also a reminder that winning on the merits is not enough. The tenant was right on every point about ownership of its equipment; it nonetheless lost its seizure for failing to describe properly what it wanted seized. When it comes to seizure before judgment, “close enough” does not cut it.<\/p>\n

Finally, the judgment decides the validity of the clause at the stage of an interlocutory application, without waiting for a full trial. The judge relies on the 1994 precedent to do so. It is a pragmatic approach that avoids leaving valuable property in limbo for years, but it presupposes that proof of ownership is clear and uncontested, as it was here.<\/p>\n

What to take away<\/h2>\n

If you are a commercial tenant.<\/strong> A clause in your lease that makes the landlord the owner of your equipment upon default is deemed not written. Do not walk away from your property on the strength of such a clause. But act quickly: dispute the landlord’s claim in writing as soon as it is made, and if you must seize, describe each item precisely (make, model, serial number, matching invoice) before instructing the bailiff.<\/p>\n

If you are a landlord.<\/strong> The standard clause inherited from old leases does not protect you. If the tenant’s equipment matters to you as security, have a movable hypothec granted and register it. Otherwise, at the end of a lease terminated for default, you will be dealing with a tenant who still owns its property, and storing or reselling it without consent could expose you to liability.<\/p>\n

In either case.<\/strong> Have your commercial lease reviewed before signing, or before re-letting. A twelve-year lease is negotiated in a few weeks; a dispute like this one is litigated over years.<\/p>\n

Related reading<\/h2>\n