Frustration of Tenancy Agreement

The law of contract includes a concept called frustration. A contract is frustrated when it becomes impossible to carry out its terms. Once that happens, the parties to the contract are freed from their obligations and the contract ends, subject to certain rules.

The Residential Tenancies Act states a number of instances when a residential tenancy agreement will be deemed to be frustrated. These are:

• If the rented premises are destroyed, for example, by fire or flood;
• If the rented premises or their common areas are damaged to the point where a reasonable landlord wouldn't do the repairs or a reasonable tenant wouldn't be willing to continue living there;
• If a public health officer makes an order under the Public Health Act that closes the property, declares that the property is not fit to live in, or otherwise makes it impossible for the tenancy to continue;
• If the rented property or any common areas are in a state that contravenes health and safety laws relating to housing, and the deficiencies are not corrected.

The law relating to frustration of contracts can be complex, but in most residential tenancy situations it should not be too difficult for the parties to wind up their relationship. The Frustrated Contracts Act of Alberta provides that money paid to one of the parties to the contract is recoverable and that money owed is no longer payable. If expenses were incurred relating to the contract before the contract was frustrated, a court may allow those expenses to be recovered.

In the situation of a tenancy agreement, frustration of the contract will mean that the agreement is over and the tenant no longer has to pay rent. The landlord will still have to account for and return the security deposit, but may claim for unpaid back rent and for any legitimate damage and cleaning costs from the security deposit, if the terms upon which the deposit was held allow for such deductions.

May 2005