The short answer is NO – at least for now.
Under the current law in Ontario, commercial landlords are not obligated to mitigate their damages when a tenant repudiates a lease and the landlord chooses not to accept the repudiation. In other words, a landlord may “do nothing,” insist on the tenant’s continued performance of lease obligations, and sue for rent as it becomes due.
This principle stems from the Supreme Court of Canada decision in Highway Properties Ltd. v. Kelly, Douglas and Co. Ltd. (1971). This case established a landlord’s ability to sue for rent upon repudiation of a commercial lease, and it has been repeatedly upheld by appellate courts, including in the recent case of Canada Life Assurance Company v. Aphria Inc.
In Canada Life, the tenant argued that the principles set out in Highway Properties are outdated and that commercial landlords should be required to mitigate their damages—just as parties to most other contracts are required to do. An intervener in the case supported this view, asserting that the evolution of commercial leasing into a more contractually based relationship brings with it the corresponding duty to mitigate.
However, the Ontario Court of Appeal disagreed, affirming that commercial landlords currently have no duty to mitigate when they elect to keep the lease alive. The Court did, however, acknowledge the growing debate on the issue, concluding:
“It is not for this Court to change this law, but for the Supreme Court or the Legislature to do so.”
Appeal of Canada Life to the Supreme Court
On June 26, 2025. the Supreme Court of Canada granted the tenant in Canada Life leave to appeal the Ontario Court of Appeal’s decision. While the law remains unchanged for now, the outcome of this appeal could have a profound impact on commercial landlords enforcement and mitigation strategies.
If the Court imposes a mitigation requirement on landlords who maintain a lease after repudiation, the shift could have the following potential outcomes:
For landlords, this could limit the ability to enforce lease terms strictly following a tenant’s repudiation of the lease and introduce greater uncertainty into commercial lease agreements that were drafted under the existing legal framework.
For tenants, it may open new arguments in rent disputes following repudiation and affect lease exits.
As the appeal progresses, the commercial leasing community will be watching closely. The Supreme Court’s ruling has the potential to reshape key aspects of commercial lease enforcement in Canada.
If you are a commercial landlord involved in a commercial lease dispute or are just wondering what the outcome of this case could mean for your commercial lease feel free to reach out to the undersigned to discuss.
Ariel Dorfman, Associate Lawyer