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Ontario commercial landlords currently have no duty to mitigate losses while keeping a commercial lease alive after tenant repudiation, but the Supreme Court of Canada's pending review of the appeal in in Aphria Inc. v. Canada Life Assurance Company ("Aphria") may soon change that long standing rule. We've outlined what you need to know.1
Current Rule:
- Ontario commercial landlords generally do not have a duty to mitigate losses if a tenant repudiates a lease and the landlord keeps the lease alive.
- This principle stems from Highway Properties Ltd. v. Kelly, Douglas & Co. ("Highway Properties"), a landmark decision over 50 years old.2
Supreme Court Review:
- The rule is now under review after the Supreme Court of Canada granted leave to appeal in Aphria on June 26, 2025.
- The appeal raises the question of whether commercial landlords should be required to mitigate even if they refuse repudiation.
Highway Properties Framework — Landlord Remedies:
- When a tenant abandons or repudiates a lease, a landlord has
four distinct and mutually exclusive options:
- Keep the lease alive and collect rent as it comes due.
- Terminate the lease and recover unpaid rent.
- Re-enter and sublease the premises on the tenant's behalf.
- Terminate the lease and claim both unpaid rent and damages for the remaining term.
- The fourth option highlights that commercial leases are contracts, not just land conveyances, allowing landlords access to full contractual remedies.
Mitigation Duty When Claiming Damages:
- If a landlord terminates the lease and seeks recovery for the remaining term, the claim is for damages, not rent.
- Damages are recoverable only to the extent losses could not reasonably have been avoided.
- Landlords are usually expected to make reasonable efforts to re-let the premises, promoting economic efficiency and reducing waste.
No Duty to Mitigate When Lease Continues:
- If the landlord refuses repudiation and keeps the lease alive:
- Rent is treated as a debt under a continuing lease, not damages.
- No obligation to mitigate arises under current common law.
Controversy and Criticism:
- The exception departs from modern contract principles, giving landlords an unusual advantage.
- Courts uphold the rule for certainty and stare decisis, leaving any reform to the Supreme Court of Canada or legislature.
Aphria Case Example:
- Aphria repudiated a long-term lease and vacated the premises.
- Canada Life declined the repudiation, made no effort to re-let, and sued for rent.
- Both the Ontario Superior Court and Court of Appeal upheld this approach under Highway Properties, while noting that the rule may warrant reconsideration.
Implications of SCC Appeal:
- The Supreme Court may:
- Reaffirm the existing no-mitigation rule;
- Impose a duty to mitigate in certain circumstances; or
- Clarify the limits of the exception.
- Until a decision is released, Highway Properties
remains good law:
- Landlords can recover rent without mitigating losses if they elect to keep the lease in force.
Stay tuned for our follow-up analysis once the Supreme Court issues its ruling, which may reshape a landlord's duty to mitigate with respect to commercial leases.
Footnotes
1. Aphria Inc. v. Canada Life Assurance Company et al, Applications for Leave, No. 41665 .
2. Highway Properties v. Kelly, Douglas & Co.,[1971] S.C.R. 562.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
