Suretyship and renewal of the lease

Suretyship and renewal of the lease

A landlord can encounter candidates he does not wish to refuse even though they are inexperienced or have an average credit file. However, he cannot let them lease his property without any surety either. Therefore, some landlords think about the possibility of a suretyship. Is it the best solution? What will happen when the lease is renewed?

The suretyship, even though it has its limits, is a solution to be considered. Having a suretyship insure that in the event of damages to the leased property or of non-payment of rent, a landlord will be able to obtain a decision against both the tenant and the surety which he will be able to execute against all of the surety’s properties. However, it is important to verify that the surety is solvent and that they own property or else, the contract will not be of any use. Furthermore, the redaction of the clause must be clear and precise for it to be enforceable.

Indeed, article 2335 of the Civil Code of Québec clearly states that the suretyship is not presumed and is effected only if it is express.

Also, article 1881 C.C.Q. states as follows:

“1881. Security given by a third person to secure the performance of the obligations of the lessee does not extend to a renewed lease.”

The Régie du logement already decided that this last article was not of public order. Therefore, it is possible to exclude it by convention. This is why some people, who thought they had only signed for a year, realised they were still liable, even after the renewal of the lease, and had to pay instead of the tenant the amount owed. This is what was decided in Structures Métropolitaines (smi) inc. v. Genviève Lesage et Jeanne Renault(1) where the surety, Mrs Renault, had signed: “[TRANSLATION] … for the duration of the lease and its renewals, as a surety”.

A similar decision was rendered in Structures Métropolitaines (smi) inc. c. Tarek Ibrahim et Hilda Nourcy(2) were it was decided that omitting to read the contract of suretyship, when the clause was clear and simple, was an inexcusable error which could not constitute a defect of consent and did not modify the obligations of the surety even if it was for the lease and its renewals.

However, it is clear that if there are no specifications concerning the duration of the suretyship, it will not extend to the renewal of the lease as stated in article 1881 C.C.Q.

On this matter, it is important to take note of article 2362 C.C.Q.:

“2362. Where the suretyship is contracted with a view to covering future or indeterminate debts, or for an indeterminate period, the surety may terminate it after three years, so long as the debt has not become exigible, by giving prior and sufficient notice to the debtor, the creditor and the other sureties.

This rule does not apply in the case of a judicial suretyship.”

Therefore if, after three years, the surety wishes to end the suretyship and there is no amount due, he will be able to do so.

A person who signed a suretyship without realizing what he signed might try to cancel the contract. In such a case, the administrative judge will have to decide if the mistake was an inexcusable error or not. In a recent decision(3), the surety, who did not speak French very well, had signed a suretyship without reading it and without asking any question, all of this, for a candidate he barely knew. When the landlord brought him in court for non-payment of rent, he finally took a look at the contract he had signed and asked the Régie to cancel it. The administrative judge, in her decision, explained that : “[TRANSLATION] knowing he had a bad comprehension of the French language he should have moved first and asked questions when the contract was concluded… which he did not. The undersigned sees the error as inexcusable.” and rejected the demand for cancellation.

In conclusion, when it is used wisely, a suretyship can be a very important tool for the relations between tenants and landlords.

(1) 2012 QCRDL 44230, 31 121025 080 G, 13 décembre 2012, régisseure Hélène Chicoyne

(2) 2012 QCRDL 42593, 31 120726 060 G, 29 novembre 2012, régisseure Linda Boucher

(3) Daniel Mc Callum c. Les immeubles Ratelle et Ratelle inc., 2013 QCRDL 1990, 29 120419 002 G, 17 janvier 2013, régisseure Isabelle Normand

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