Many professionals (accountants, engineers, lawyers, dentists and other health professionals) operate through professional corporations believing this structure protects their personal assets from business liabilities. A recent Alberta Court of King's Bench decision serves as a reminder that this assumption can be wrong, and costly.
In Telsec Property Corporation v Tan Dat Tran Professional Corporation (2026 ABKB 424), the Court held a dentist personally liable for his corporation's commercial lease obligations, even though:
the lease was only signed by the landlord and the professional corporation as the tenant;
there was no indemnifier, and no personal guarantee provided;
the intent of no personal liability was well documented by using the typical language of “intentionally deleted” for the indemnification schedule in the lease;
during re-negotiations, about 3 years into the term of the lease, the landlord demanded a personal guarantee as condition for any amendments, but the dentist declined and no amendments to the terms of the lease were made;
at the time the contract was entered, neither the landlord nor the dentist was aware of nor expected the potential application of section 107 of the Health Professions Act;
The decision has significant implications for all Alberta professionals, including dentists, physicians, lawyers, accountants, and other professionals who practice through professional corporations.
The Facts
A lease signed by a professional corporation
Professional corporation entered into a 10-year commercial lease;
Dentist was not a party to the commercial lease;
There was no indemnifier in the lease and no personal guarantee provided;
The indemnification schedule was “intentionally deleted” reaffirming the intent of the parties that no personal liability would attach;
At the time the contract was entered, neither the landlord nor the dentist was aware of nor expected the potential application of section 107 of the Health Professions Act;
Dental professional corporation invested $900,000 in leasehold improvements.
Re-negotiation of lease
After about 3 years into the term of the lease, the professional corporation sought revised terms. The landlord demanded, as a condition for any amendments, a personal guarantee from the dentist, which the dentist declined;
Lease continued without any personal guarantee.
COVID-19 and eventual default
Due to the COVID-19 circumstances the dental clinic started to struggle;
In June 2021, the dental professional corporation defaulted by failing to pay rent;
Dentist and dental professional corporation left the premises in exceptional shape to support the landlord and lender during an auction process and support the landlord’s efforts to re-let the premises.
New tenant and freebies
Leasehold improvements had to be surrendered to the landlord (as per typical commercial lease terms), which were valued at $585,000 five months before the default;
Landlord was able to re-let the premises with a new tenant by way of lease dated August 13, 2021 (approx. 1.5 months after default);
The new tenant opened its doors to the public on October 10, 2021;
Despite the quick re-letting and early opening date, the landlord asked the new tenant to only start paying Additional Rent starting January 2022 and Basic Rent on March 31, 2022).
The claim
Landlord eventually brought a claim, naming both, the dental professional corporation and the dentist personally;
Despite having taken ownership of the leasehold improvements valued at $585,000, the landlord not only sued for the outstanding rent for June, July, and August 2021, but included in its claim the rent-free period until March 2022, plus interest, plus solicitor-client costs;
The central question
Is the dentist, as shareholder of the dental professional corporation, personally liable pursuant to s. 107 of the Health Professions Act, even though he was never party to the lease, and the commercial landlord and professional corporation tenant never intended any type of indemnification or personal liability of the dentist?
The Court said: Yes.
The (serious and personal) implications of this decision for thousands of Alberta professionals
The traditional rule
Business owners generally expect:
a corporation is a separate legal entity;
shareholders are not personally responsible or liable for corporate debts;
individuals are usually only personally labile for corporate debt if they sign an indemnity agreement or personal guarantee that complies with the Alberta Guarantees Acknowledgement Act;
Section 107 of the Health Professions Act (and the equivalent for accountants, lawyers, doctors, and engineers) which does pierce the corporate veil for professional corporations, typically does so in relation to the provision of professional services;
These traditional expectations of when an individual is personally liable is reinforced by Alberta's Guarantees Acknowledgement Act (GAA), an act that protects individuals to ensure individuals are aware of the liabilities they assume from others (such as corporate debt).
The GAA has strict statutory form requirements and guarantors must acknowledge a personal guarantee before a lawyer. Failure to comply with the GAA will render a personal guarantee unenforceable.
Why it matters
Personal liability is a big risk.
The question asking an individual to co-sign a lease/loan, or sign an indemnification agreements or personal guarantee, is usually a question that relates to lengthy negotiations between parties.
Commercial lawyers typically spend significant time on negotiating agreements to ensure the scope of personal liability is clear, understood, and agreed to by all parties.
This Court decision renders this traditional rule/approach null and void, or less relevant, for agreements that are entered into by professional corporations.
The unusual twist in this case
The Court acknowledged:
no guarantee existed;
no indemnity existed;
personal liability had been discussed and rejected;
neither party intended the dentist to be personally liable.
Yet the Court still imposed personal liability.
Why?
Because the liability arose from statute, not contract.
The Health Professions Act Changes the Analysis
Section 107 of the HPA
Introduce section 107.
The provision states that voting shareholders of certain (physicians, surgeons, dentists, chiropractors, optometrists) professional corporations are liable as though they were carrying on the business “as an individual providing professional services”.
The HPA further defines “professional service” as an act that falls within the practice of a regulated professional, and then further provides a closed list of items that fall within the practice for each regulated professional. For a dentist, listing specific items related to the actual practice of dentistry related to patient care, such as:
(a) evaluate, diagnose and treat, surgically or non‑surgically, diseases, disorders and conditions of
(i) the mouth, which includes teeth, gums and other supporting structures,
(ii) the maxillofacial area, which includes upper and lower jaws and joints, and
(iii) the adjacent and associated structures of the head and neck, to maintain and improve a person’s physical, psychological and social health,
(b) provide restricted activities authorized by the regulations, and
(c) teach, manage and conduct research in the science, techniques and practice of dentistry.
The Court's interpretation
The dentist argued:
personal liability should only apply to agreements or work that involve professional services provided to patients;
a commercial lease is merely a business transaction.
the commercial landlord has no gum, jaw, or teeth and is not capable of receiving “professional services”;
a corporation is not human and therefore not a member of the public that legislature contemplated requires protection under the Health Professions Act and under Section 107 of the HPA.
even the corporation landlord admitted that at the time of the contract it did not contemplate application of the Health Professions Act, hence at the time of contract the corporate landlord did not identify as “patient” or “member of public” that required protection under that statute (that re-assignment of identity only happened after default, after the corporate landlord appears to have regretted the bargain it entered into).
The landlord argued:
the lease was integral to carrying on the business of the dental practice;
section 107 extends beyond direct patient care;
section 107 contains limitations and safety guards for the public;
professional corporations are required to hold mandatory liability insurance to protect patients, and s.107 would be redundant if it only applied to patients.
The Court agreed with the landlord.
The Court's Key Finding: "Carrying on the Business"
A broader liability scope for “directly connected” business
The Court found that:
leasing premises is necessary to operate a dental practice as the lease provided the location for the dental professional corporation and the dentist to provide the professional services;
the scope of personal liability of the professional corporation’s shareholders includes activities that extend and are “directly connected” to the provision of the professional services.
section 107 refers to carrying on the business of the professional corporation, not merely providing professional services.
Result
The dentist, shareholder of the professional corporation, was held to be personally liable for the professional corporation's commercial lease obligations despite never being party to the lease and despite never having signed any indemnification agreement or personal guarantee.
When it comes to professional corporations, the traditional approach is now obsolete. The commercial lease in this case intended 0% indemnification by anyone. Even if commercial lawyers who assist professional corporations negotiating agreements, and try to limit a professional shareholder’s liability with an indemnification agreement or guarantee that is limited in time or amount, the Court in this case is clear, that the intent of the parties does not matter. If the counter-party identifies as a member of the public that expected protection under the HPA, such as Telsec argued in this case, the statutory s. 107 liability will override any contractual intent or agreement.
Why This Matters Beyond Dentists
The decision is applicable to other health professionals and other professions such as accountants and lawyers.
The Court stated in its decision that the wording of s. 107 of the HPA is virtually identical or similar to other legislation, such as the Legal Professions Act and in its summary and conclusions make reference again that “similar wording is found in the legislation governing health professionals, as well as lawyers and accountants.”
So the following professionals practicing through professional corporations should take note of this decision and seek independent legal advice to assess their personal exposure and ways to address the implications of this decision:
Dentists
Physicians
Surgeons
Chiropractors
Optometrists
Lawyers
Accountants
Other professionals practicing through professional corporations
What Types of Obligations Could Create Personal Liability?
The decision raises broader questions about the scope of personal liability.
Based on the Court's reasoning, personal liability may potentially arise from obligations “connected to” or “directly connected to” carrying on the professional practice, including:
office leases;
equipment leases;
employee wages;
financing arrangements;
service contracts;
other operational expenses.
Based on the reasoning of the Court in this decision, the key question appears to be whether the obligation is sufficiently connected to carrying on the business of the professional practice.
Can Professionals Still Limit Their Exposure?
The Court's comments
The Court observed that some professionals have adopted alternative structures designed to reduce personal exposure, including using management companies and other business arrangements to contract with commercial entities such as commercial landlords or other companies.
A cautionary note
The Court also noted that not every structure will be effective and that courts will closely examine how arrangements actually operate.
The Court referred to the decision in 852819 Alberta Ltd v ManII Management (Edmonton) Ltd, 2026 ABKB 11 as an example in which lawyers created a limited liability company to hold the lease for the law practice. The Court further noted that this practice was endorsed by the Law Society of Alberta in its practice guidance:
Some lawyers incorporate a management company that employs the spouses and/or children of the proprietor or the partners. Because of the restrictions in the Legal Profession Act, a management company cannot practice law, so its activities must be restricted to providing non-legal services such as secretarial, accounting, administrative, space and other like services to the firm.
Given that the Court in Telsec found that a commercial lease is close enough connected to the provision of dental services to attract personal liability for dentists under s. 107 of the HPA, time will tell whether the governing bodies will continue to endorse the practice of management companies holding a commercial lease for professionals, or whether the “closeness” to the provision of professional services results in those professionals now being offside, because a management company cannot practice dentistry.
Where does the line stop? Is the “closeness” line for finding personal liability under s. 107 of the HPA the same as the line for a management company holding a commercial lease? Couldn’t a landlord such as Telsec, who regrets the bargain it entered into, raise a similar argument, that the management company is (a) a sham to avoid s. 107 HPA protection; and (b) the professionals are offside given they are contracting through a non-professional entity for activities that are directly or closely connected to the professional services?
Time will tell whether this alternative will or can prevail.
One thing is for sure, the decision has some important takeaways.
Key Takeaways
1. A professional corporation entering into commercial agreements may not shield the professional shareholder from business liabilities
This decision clearly establishes personal liability for the professional for commercial leases and it is likely any commercial lending for equipment or a building used for the professional services, will also attract personal liability.
Professional shareholders cannot contract out of s.107 of the HPA and irrespective what the landlord (or commercial realtor) promises or agrees at the time of entry into the contract, the landlord can rely on s. 107 of the HPA several years later to seek full recovery of outstanding amounts from the professional shareholder (effectively, changing the bargain for its own benefit).
The liability risk for professionals extends beyond malpractice claims of patients. The protection of the Health Professions Act expands to members of the public, which the Court now held includes the financial health of corporate commercial landlords.
2. The intent of the parties or personal guarantees has no weight
The Court found statutory liability for the professional shareholder despite the fact that the parties had a clear agreement that stipulated 0% personal liability for the professional and despite the corporate commercial landlord agreeing to that.
When it comes to default (or presumably whenever throughout the term of an agreement), a commercial landlord can now identify as a member of the public entitled to protection under the Health Professions Act and seek indemnification from the professional shareholder in addition to the professional corporation.
3. What now?
If you are a commercial lawyer advising professionals:
a. Previously your analysis may have been based on the contract and then on whether your professional is a co-signor (party to the agreement), or signed an indemnification or personal guarantee, and if so, whether those complied with the GAA.
b. Your analysis now must include s. 107 of the HPA or any other statutes governing your professional. You must be familiar with this decision and use the “direct connection” analysis to assess your client’s exposure.
c. The authors foresee some challenges in the M&A sphere of this decision. Compared to a patient seeing a professional for dental work, a commercial lease is a long-term contract, often 5 to 10 years, with options to extend for another 5 or 10 years. In this case, the lease allowed 2 extensions of 5 years each, which now means a potential 20 years of personal liability exposure. In those years ownership structures can or will likely change as new professionals may join a practice and others may decide to retire, so commercial lawyers must be mindful of how this decision impacts their clients.
The “exiting” professional cannot contract out of the personal liability exposure under s. 107 of the HPA, so this decision could significantly impact “exiting” or “retiring” professionals, because even though they are no longer involved, they were at some point a shareholder of the professional corporation that is party to the lease and hence could still be liable post-exist.
While a malpractice situation can be directly connected to doctor-patient service (specific doctor performing a procedure on a patient), expanding s. 107 of the HPA to a 10-year commercial arrangement creates various different possible scenarios. Instead of lease assignments, M&A counsel may want to consider a complete termination of an existing lease and entering into a new one, to try to end the liability flow for the selling/retiring shareholder. If it is an assignment, the former professional corporation’s shareholder may still be liable for any financial defaults of the new professional shareholder lessee.
If you are a professional:
a. operating through professional corporations, you should review your business arrangements and risk exposure in light of this decision and explore your options;
b. when buying into or selling your practice, you need to keep your personal liability implications in mind and review the existing agreements and structure very carefully, because you could personally lose your house or any other personal assets if you don’t.
c. Remember, it does not matter what a lease (or other connected agreement) says or a landlord promises. The landlord or counterparty can rely on s. 107 of the HPA to rectify a bargain they may regret, just like Telsec promised no personal liability and then did a complete U-turn and went after the dentist personally.
If you are a landlord/lender/equipment seller:
a. This decision is for you!
b. If you contracted with a professional corporation and that corporation defaulted, the voting shareholders are now all personally liable for those agreements.
c. If you experienced defaults by a professional corporation within the last 2 years and thought you are out of luck due to an invalid/unenforceable guarantee, you may want to consider reviewing those old agreements again and see if this case now opens the door to pursue the professional voting shareholders. (Alberta has a 2-year limitation period, act fast!).
d. Going forward, personal guarantees and other forms of indemnification may be less of a hindrance in negotiations. No matter whether you promise not to pursue the professional shareholders or not when you contract with a professional corporation counterpart, given this decision, s. 107 of the HPA will have you covered (as long as your activity is connected to the professional services).
How SVR Lawyers Can Help
The authors, who have intrinsic knowledge with this case and many other cases that were part of the legal arguments of this case, throughout the last five years of legal proceedings, recommend to professionals to seek legal advice when entering into agreements with their professional corporations.
Whether you are negotiating a lease, structuring a professional practice, reviewing financing arrangements or assessing your exposure under Alberta's professional corporation legislation, Lukas Frey and Taran Dhanda-Sidhu at SVR Lawyers can help you and will work with you to assess your risks, identify strategies to manage same, before they become costly surprises.
A careful review today may prevent a significant personal liability claim tomorrow. Personal liability means you could lose it all.
