Your Commercial Tenant Walked Out Mid-Lease — Do You Have to Re-Let Right Away? Ontario’s Duty to Mitigate Isn’t Yes-or-No, It’s Which-Road-You-Take
A tenant hands back the keys with years left on the lease. Some landlords think they can simply sit and collect to the end; others panic and re-let immediately, sure a judge will punish delay. Both instincts are half-right — and which half is right depends entirely on the remedy you choose in that first moment.
A commercial tenant just broke the lease and disappeared, and everyone keeps telling me I have to re-rent the space immediately or I’ll be stuck eating the loss myself. Is that actually the law, or can I hold the tenant to the full remaining lease?
Start with the timing, not the yes-or-no. The instant your tenant hands back the keys you are standing at a fork, and Ontario law fixes your obligations to the branch you step onto — not to the walkout itself. Ontario’s Commercial Tenancies Act (R.S.O. 1990, c. L.7) never once mentions mitigation, re-letting, or abandonment, so this whole area is built by the courts. The Supreme Court of Canada’s Highway Properties (1971) decision lays out four separate branches, and stepping onto one shuts the others.
Three branches — keeping the lease alive and billing rent as it falls due, terminating and suing only for arrears to the termination date, or re-entering and re-letting on the tenant’s account — carry no duty to mitigate under current law. The duty lives on the fourth branch alone: terminate and claim your entire future loss over the unexpired term, and even then only if you gave the tenant notice at termination that you would claim it. So “do I re-let now?” is the wrong opening question — the duty follows the branch, so pick the branch first.
Sources: Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd. (Supreme Court of Canada, 1971); Ontario Commercial Tenancies Act, R.S.O. 1990, c. L.7 (current e-Laws version, full text checked Aug 2026 — no occurrence of mitigate / re-let / abandon). Four-remedy framework cross-checked across several Ontario commercial-leasing firm commentaries.
I’m Arthur Zhao. Here is a scene I’ve watched play out more than once: a landlord learns a commercial tenant has cleared out, and within a week does something that feels obviously right — fires off a termination notice, scrambles to re-let, or decides to sit tight and keep billing to the end of the term. It feels like taking control. More often it is a door quietly closing behind them.
Commercial leasing in Ontario doesn’t reward the instinct; it rewards the order of operations. The ways a landlord can respond to a walkout don’t blend into one another — each is a separate track with its own cost, its own required paperwork, and its own answer to the question people ask first: do I have to go find a new tenant? Choose one by reflex and you can kill a cheaper or a larger claim before a lawyer is ever in the room.
And this is not settled ground. While you read, the Supreme Court of Canada is sitting on a decision that reaches straight into one of those tracks — so take everything below as the law as it stands today, with a live question mark hanging over it.
→
→
→
→
→
The counterintuitive part: an Ontario commercial landlord can sometimes just sit and collect
Start with the fact most people find surprising. If a commercial tenant abandons and you refuse to accept the breach — you keep the lease alive — current Ontario law lets you sue for each rent instalment as it comes due, with no obligation to go find a replacement. You can, in principle, leave the space empty and bill the departed tenant to the end of the term.
That is real, and it is the opposite of what most people assume. But it comes with a bill of its own: you may be carrying a dark unit for years, suing instalment by instalment, and it holds true only so long as you never flip the “terminate” switch. The instant you end the lease, you leave this road — and a different rulebook takes over.
Why the statute is no help: the Commercial Tenancies Act is silent on all of this
Landlords often assume a “duty to mitigate” must be written into some Ontario statute. On the commercial side, the opposite is true.
I checked the current full text of Ontario’s Commercial Tenancies Act (R.S.O. 1990, c. L.7) word by word: the words mitigate, re-let, and abandon do not appear — not once. The CTA governs a different machinery entirely: forfeiture, re-entry, relief from forfeiture, and overholding. It spells out how a landlord retakes possession and how a tenant can seek relief — but it never touches the question of whether the landlord must go looking for a new tenant.
That silence is the whole point. Because the statute says nothing, mitigation in commercial leasing is not a statutory question at all — it is a case-law question. And the court that filled the gap is the Supreme Court of Canada.
The four remedies on the menu (Highway Properties, 1971)
The framework comes from the 1971 Supreme Court of Canada decision Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd. It gives a landlord facing an abandoning tenant four mutually exclusive remedies — a menu you pick one item from:
1. Keep the lease alive. Change nothing, insist on the lease, and sue for rent as it falls due. No duty to mitigate under current law.
2. Terminate and sue for arrears. End the lease and recover the rent and losses accrued up to the termination date — nothing beyond it.
3. Re-let on the tenant’s account. Tell the tenant you are re-letting on their behalf, retake the space, and charge the shortfall back to them.
4. Terminate and claim the future loss. End the lease, but with notice to the tenant at termination that you will claim damages for the lost benefit of the lease over its whole unexpired term — crystallizing the entire future loss now.
The first three carry no duty to mitigate today. The dividing line is remedy four: it is the only road that both lets you settle the whole future loss in one shot and puts a duty to mitigate on your shoulders.
The two poles most landlords actually choose between
⚠️Some doors open only once. Terminating the lease cannot be undone — take that step and the “keep it alive and collect” road is gone for good. Worse, if you terminate now but later decide you want the whole future loss, the required notice had to travel with the termination itself; there is no adding it after the fact. Which is why the cheapest move in this entire exercise is simply deciding, in advance, which road you are on.
Where the duty to mitigate actually bites — and the notice that switches it on
This is the single most important thing to hold onto, and the point readers most often get backwards.
The duty to mitigate is not hanging around your neck from the moment the tenant leaves. It is switched on only when you choose remedy four — terminate and claim the whole future loss. And switching it on has a precondition: you must have given the tenant notice, at the moment of termination, that you intend to claim on that basis. Miss that notice, and it becomes very hard to recast your claim later as a one-shot recovery for the entire unexpired term.
Once you are on that road, the damages are, broadly: the present value of the future rent for the unexpired term, minus the actual rental value of the premises over that same period — that is, minus what you could have recovered by re-letting. That is the substance of the duty: the law only lets you claim the losses you could not reasonably have avoided. The more passively you sit on an empty unit, the more a court may treat part of the loss as self-inflicted and refuse to charge it to the tenant.
🚨Beware the have-it-both-ways trap. Landlords often assume they can leave the unit dark, lift not a finger, and still bank the full future rent. You cannot split the difference: on the “keep the lease alive” road there genuinely is no duty to mitigate, but you are confined to suing instalment by instalment on an empty unit; the moment you have terminated and gone after the future loss, re-letting stops being optional — leave it idle and a court hands part of the loss back to you as self-inflicted. Reach for both and you can end up with neither.
What about a lease clause that says “the landlord has no duty to mitigate”?
Commercial leases are heavily negotiated, and many landlords insert a clause stating the landlord has no duty to mitigate, or that the tenant waives any mitigation defence. Whether — and how far — such a clause holds up is a genuinely open question, and it only gets more uncertain as the Supreme Court reconsiders the underlying rule (below).
I am not going to tell you a clause like that is bulletproof, and I am not going to tell you it is worthless — that is precisely the drafting call you want a commercial-leasing lawyer to make on your specific wording. What I will say is this: leaning on the clause without understanding the four-remedy framework behind it is exactly how landlords get blindsided in court. The clause interacts with which road you took; it does not replace the analysis.
Don’t treat this as settled: the Aphria appeal is moving the rule
Everything above is current law — but it is current law with a short shelf life, and here is why.
The rule is under active review at the Supreme Court of Canada. The case is Aphria Inc. v. Canada Life Assurance Company, et al. (SCC file no. 41665), on appeal from Canada Life Assurance Company v. Aphria Inc., 2024 ONCA 882. The sequence is what matters: leave to appeal was granted in June 2025, and the Court actually heard the appeal on February 18, 2026. As of this writing the judgment is reserved — argued, but not yet released. The question is the one at the centre of this piece: must a landlord who refuses the tenant’s repudiation and keeps the lease alive also mitigate? The Ontario Court of Appeal below kept the current “no duty” rule in place.
Read the timing carefully, because this is the part that changes behaviour: this is not a distant maybe — the hearing is already behind us and the ruling could land at any time. Current law still governs today, but with the appeal argued and only the decision outstanding, the rule could shift without much warning. I won’t predict how the Court will rule. What I will flag is timing: before you sign a long lease, serve a termination notice, or file suit, check whether the Supreme Court has released its decision — don’t bank on “I can leave it empty and collect forever” as a fixed guarantee.
ℹ️Check the date before you rely on any of this. The “no duty to mitigate if you keep the lease alive” rule is exactly what is under the Supreme Court’s pen right now: the Aphria appeal (SCC file no. 41665) was argued on February 18, 2026, and the decision is reserved — not yet released as of this writing. It is still good law today, but the only thing left is the ruling itself, so before you sign a long lease, serve a termination notice, or sue, confirm the judgment has not already come down. Nothing here forecasts the result — it states the law as it currently stands.
💡 My own take: in commercial leasing, a landlord’s biggest risk is rarely whether the tenant walks — it’s the instinctive move you make the moment they do, the one that quietly locks in your legal position. None of the four roads is free. Keep the lease alive and you carry vacancy and years of instalment-by-instalment lawsuits; terminate and chase the future loss and you take on the duty to mitigate and the burden of proving you tried. So the real work happens before you act: decide whether you want to “collect slowly” or “settle it all now,” then take the matching road and keep the matching evidence. Layer the Aphria uncertainty on top, and my advice to landlord and tenant is the same — don’t run on instinct. Where the dollars or the term are large, spend the hour with a commercial-leasing lawyer to get this first step right; it is far cheaper than fixing it in court later.
- Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd. (Supreme Court of Canada, 1971) — the landlord’s four remedies on tenant abandonment, and the duty to mitigate attaching to the fourth (terminate + future damages).
- Ontario Commercial Tenancies Act, R.S.O. 1990, c. L.7 (current e-Laws version) — full text carries no mitigate / re-let / abandon; governs forfeiture, re-entry, relief from forfeiture, and overholding.
- Aphria Inc. v. Canada Life Assurance Company, et al. (Supreme Court of Canada, file no. 41665; on appeal from Canada Life Assurance Company v. Aphria Inc., 2024 ONCA 882) — leave granted June 2025, appeal heard Feb 18, 2026, judgment reserved and not yet released as of Aug 2026; issue is whether a landlord who keeps the lease alive must also mitigate.
- Four-remedy framework, the termination-notice requirement, and the damages measure cross-checked across several Ontario commercial-leasing firm commentaries (Foglers, KMB Law, BLG, Fasken, Bennett Jones) — non-official sources; rely on the case law itself and your own lawyer for any specific matter.
When a Commercial Tenant Stops Paying: A Landlord’s Distress and Re-Entry Remedies in Ontario →Tenant Broke the Lease Early? What Ontario Landlords Must Do Under the Duty to Mitigate →Your Tenant’s Renovation, a Lien on Your Building: How Ontario Commercial Landlords Are Actually Protected →First-Time Renter Guide →
Frequently Asked Questions
Is it true that if I don’t re-rent the unit fast, I lose my claim against the tenant who left?
That fear is mostly a residential-lease reflex bleeding into commercial leasing. On the commercial side you have four different remedies, and only one of them — terminating and claiming the entire future loss — ever obliges you to re-let. Keep the lease alive instead and bill rent as it comes due, and current law asks nothing of you on the re-letting front. What actually costs you money is not slow re-letting; it is picking a remedy by reflex before you understand the four.
Can I just leave the space dark and wait to collect the whole remaining rent?
Down the “keep the lease alive” road, yes — current Ontario law allows it and imposes no duty to mitigate. But price the road honestly: your only tool is to sue for each instalment as it comes due, you may nurse an empty unit for years, and the Supreme Court is reconsidering this very rule right now in the Aphria appeal. Sitting and collecting is not risk-free — it simply carries a different set of risks than the other roads.
What is the one step I can’t skip if I want to collect all the future losses in a single claim?
The notice at termination — that is the piece landlords lose on. To crystallize the whole unexpired term into one claim you must, at the moment you terminate, tell the tenant in writing that this is what you are claiming; miss it and you can be stuck with arrears only. From there you also have to genuinely re-let and document it, because on this road your recovery is the present value of the future rent minus the premises’ actual rental value — the court compensates only losses you could not reasonably have avoided.
Why can’t I just apply what I already know about residential tenancies?
Because the two run on opposite engines. The Residential Tenancies Act writes the landlord’s duty to mitigate straight into the statute, so the rule is relatively fixed and disputes go to the LTB. The Commercial Tenancies Act says nothing about mitigation at all, leaving it to case law — which is why the commercial answer is “it depends which remedy you chose” and the forum is the courts. Importing the residential “you always have to mitigate” assumption is exactly how commercial landlords get tripped up.
How soon could the Aphria case change this, and what should I do in the meantime?
Sooner than most people assume — the hearing is already over. In Aphria Inc. v. Canada Life Assurance Company, et al. (SCC file no. 41665; below, 2024 ONCA 882), the Supreme Court is deciding whether a landlord who keeps the lease alive must also mitigate; it heard argument on February 18, 2026, and the judgment is reserved — not yet released as of this writing. Current law still governs, but with only the decision outstanding it could land at any time, so before signing a long lease or acting on an abandonment, have the remedy and mitigation clauses reviewed and check whether the ruling has come down.
Discover more from GTA Real Estate Broker | Arthur Zhao
Subscribe to get the latest posts sent to your email.
