CCAA stay cannot revive expired lease

Compeer Financial, PCA v National Bank of Canada, 2026 ABKB 771
Can a CCAA stay be used to extend an expired lease against a landlord's wishes?

Summary: The Alberta Court of King’s Bench has ruled that CCAA protection cannot be used to effectively extend an expired commercial lease, granting a landlord’s application to lift the stay of proceedings and evict Sunterra after its fixed-term lease expired on October 31, 2026. Sunterra argued that it needed two additional months to complete its sale and investment solicitation process, potentially secure a refinancing or purchaser, and negotiate a new lease, but the Court found that no extension had been agreed to and that the CCAA does not permit insolvent debtors to retain possession of property over which they no longer have legal rights. The Court emphasized that restructuring objectives cannot be pursued by compelling third-party property owners to continue supporting an insolvent business, although it granted Sunterra a 15-day wind-down period and ordered it to pay occupation rent during that time.

Sunterra, a company subject to creditor protection under the Companies’ Creditors Arrangement Act, was a tenant of certain leased premises since 1996. Following the expiry of a long-running lease, Sunterra and the former owner entered into a month-to-month tenancy, which ran until July 1, 2026. At that time, Sunterra and the landlord entered into a fixed-term lease expiring October 31, 2026.

The landlord sought to lift the stay of proceedings to allow it to evict Sunterra. The landlord argued that the lease had expired, while Sunterra argued that the lease had not expired and, in any case, the Court had the power, in balancing interests in the lift-stay analysis, to allow it to continue occupying the premises for two more months.  During that period, Sunterra hoped to advance its sales and investment solicitation (SISP) work and convince the landlord to enter into a new lease with Sunterra (following a refinancing) or a third-party purchaser of its business. Sunterra claimed that the landlord verbally agreed to a short lease extension, on a month-to-month basis, beyond October 31^st , and to not terminate the lease while Sunterra advanced its SISP, albeit no later than December 31, 2026. The landlord disputed that any extension was agreed to.

The CCAA’s remedial powers are intended to assist an insolvent debtor in restructuring, refinancing, or disposing of its assets as they exist from time to time.  In the case of leased assets, when the leases expire naturally (i.e., by their own terms), the assets cease to form part of the business.  The CCAA does not, and should not, deprive third parties of their assets when the debtor lessee ceases to have any right to them. Put differently, lessors cannot, and should not, be compelled to effectively extend expired leases.

Sunterra cited discussions in April 2026 as the basis of its understanding that the lease would be extended, effectively, for sufficient time to allow the SISP process to be completed.  However, after those discussions, it agreed to the fixed-term lease revival agreement i.e. with the extension (from July 1, 2026) running only until October 31, 2026. The revived lease made no reference to any pre-existing agreement that it, or any alternative lease, would run as long as needed to allow completion of the SISP or, in any case, beyond October 31, 2026.

The inescapable inference was that Sunterra anticipated completing its SISP work and presenting the resulting refinanced entity or a third-party purchaser to the landlord by October 31.  Sunterra’s problem was that it had not completed the SISP work by that date. It committed to a lease running only to that date, hoping that a successful SISP would convince the landlord to extend the lease beyond that date, with Sunterra or a third-party purchaser of the Britannia entity. The Court found that Sunterra had no genuine understanding that the lease would extend beyond October 31, and no lease would remain in place after that date. 

Sunterra argued that, even if no ongoing lease existed, the Court had the jurisdiction to decline to lift the stay through to December 31.  This would allow Sunterra to continue to advance the SISP, continue operating through the anticipated busy pre-Christmas period, and, if the SISP and negotiations with the landlord were unsuccessful, take all necessary shutdown steps in an orderly manner before handing back the premises at year’s end. The landlord argued that the CCAA does not empower the Court to effectively extend a naturally expired lease and that, in any event, the balance of interests favours restoring the property to the landlord (i.e. the stay should be lifted).

Where a lease naturally expires, the leased asset ceases to form part of the assets protected by the CCAA stay.  While the CCAA shelter prevented any premature eclipsing of the lease, the stay has no logical application to property over which the insolvent debtor no longer has rights, as with a naturally expiring lease. Where the lessor wants the property returned, the lessee has no rational basis for objecting.

Applying the lift-stay factors canvassed in Wallace & Carey Inc (Re), 2025 ABKB 750, the Court found that the landlord had “serious grounds” or a “sound reason” for the stay being lifted, namely, it owned property over which Sunterra had no continuing rights, and the proposed eviction was completely meritorious. Owners of property held or occupied by a CCAA debtor that no longer has rights to that property are in a different position than other stakeholders. They are akin to persons in a bankruptcy setting who can retrieve their property via s. 81 of the BIA. The CCAA’s remedial objectives cannot be pursued by dragooning property over which the insolvent has no rights.

Accordingly, the Court approved the landlord’s application to lift the CCAA stay, subject to a 15-day wind-down period during which the landlord was prohibited from taking eviction steps, ending on November 14. The Court also ordered Sunterra to pay occupation rent at the rate specified in the revived lease during this period.

Judge: The Honourable Justice Michael Lema

Professionals involved include:

• James Flanagan and Kevin Hoy of McLennan Ross for Certus Developments

• Robert Chadwick, Caroline Descours, Andrew Harmes, and Gurratan Gill of Goodmans for Sunterra Food Corporation et al.

• Scott Chimuk of Blue Rock Law for the Sunterra Parties

• Keely Cameron of Bennett Jones for Compeer Financial, PCA

• Sean Collins, K.C. and Sean Smyth, K.C. of McCarthy Tetrault for National Bank of Canada

• Nicole Taylor-Smith of Miller Thomson for Farm Credit Canada, Secured Creditor

• Lenci Kadavil of Parlee McLaws for Signature Pointe Developments Inc.

• Gunnar Benediktsson and Justin Gottschling of Norton Rose Fulbright for FTI Consulting (Hassan Tariq and Dustin Oliver) as Monitor for the Sunterra Parties

• Neil Narfason is the Court Appointed Chief Restructuring Advisor