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Landlord and Tenant (Commercial) - Breaking a Lease. Curriculum Services Canada/Services Des Programmes D’Études Canada (Re)
In Curriculum Services Canada/Services Des Programmes D’Études Canada (Re) (Ont CA, 2020) the Court of Appeal, in the course of a landlord's claim for rent over the balance of the lease in the tenant's bankruptcy, summarized the important Highway Properties commercial L&T:(i) The Supreme Court decision in Highway Properties
[69] Highway Properties involved the claim of a landlord for prospective losses following a tenant’s repudiation of an unexpired lease. The tenant had abandoned the premises and the landlord took possession, while asserting a claim for damages for its loss calculated over the unexpired term of the lease. The lower courts had dismissed the landlord’s claim for prospective damages, concluding that the repudiation of the lease by the tenant and the taking of possession by the landlord amounted to a surrender by operation of law, so that the lease ceased to exist. Accordingly, claims for prospective loss could not be supported and only accrued loss could be claimed.
[70] At the time the case was heard, the law recognized three mutually exclusive options available to a landlord on a tenant’s repudiation of a lease: (i) to do nothing and insist on the tenant’s performance of the terms and sue for rent or damages on the footing the lease remains in force; (ii) to elect to terminate the lease, retaining the right to sue for rent accrued due or for damages to the date of termination for prior breaches of covenant; or (iii) to advise the tenant of the landlord’s intention to re-let the property on the tenant’s account and to enter into possession on that basis: see Highway Properties, at p. 570.
[71] In Highway Properties, Laskin J., writing for the court, observed that a lease is both a conveyance and a contract. The termination of the tenant’s estate in the land when its repudiation was accepted by the landlord did not necessarily mean that the tenant’s covenants under the lease came to an end. Laskin J. accepted the proposition that the landlord had a fourth contractual option on repudiation of the lease, which was exercised in that case: to terminate the lease with notice to the tenant that damages will be claimed for the loss of the benefit of the lease over its unexpired term, while repossessing the leased property.
[72] Highway Properties specifically addressed remedies available to a landlord after a tenant’s repudiation of the lease. It did not, however, change the legal effect of a disclaimer or alter the principle in Re Mussens. To treat a disclaimer as a repudiation for damages purposes is to ignore the fundamental distinctions between surrender and disclaimer on the one hand and repudiation on the other.
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