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Landlord and Tenant (Commercial) - The Nature of a Commercial Lease. 911 Priority Corporation v. Murray
In 911 Priority Corporation v. Murray (Ont CA, 2020) the Court of Appeal reverses a commercial tenant's success on an application brought by the landlord. I include it not for any legal principles but to show the harsh nature of commercial leasing, in comparison to the relatively humane nature of residential leasing:[1] The appellants are the landlords of a commercial space that was leased to the respondent tenants. The written lease contained a provision in s. 17.1 Right to Re-enter, which in relevant part provides as follows:When
(a) the Tenant shall be default in the payment of any Rent whether lawfully demanded or not and such default shall continue for a period of Seven (7) consecutive days following written notice
…
Then and in any of such cases the then current month’s Rent, together with the Rent for the three (3) months next ensuing shall immediately become due and payable, and at the option of the Landlord, the term shall become forfeited and void, and the Landlord without notice or any form of legal process whatsoever may forthwith re-enter upon the Premises
… [2] The respondents were in arrears of rent beginning in August 2018. The appellants served a written notice under s. 17.1 of the lease demanding the outstanding rent, as well as the September rent and giving seven days to pay.
[3] Although the respondents paid the August and September rent by October 9, 2018, they did not pay the accelerated rent provided by s. 17.1 of the lease. They continued in arrears until January 2019, when another written notice was sent. That notice gave only three days to pay.
[4] Payment was not made, and the appellant landlords re-entered after five days, not seven as required by s. 17.1 of the lease. The respondents then brought an application for a declaration that the notice of termination was void and for damages for wrongful termination.
[5] The application judge held that because the January notice was defective and the re-entry before seven days was wrongful, the landlord was in breach of the lease by wrongfully terminating it. She ordered a trial of the issue of the respondents’ damages.
[6] We agree with the appellants that the trial judge erred in law by failing to find that the landlord was entitled to re-enter based on the failure of the tenant to comply with the August 2018 notice, by paying the arrears together with the accelerated rent, provided automatically under s. 17.1 of the lease. That breach continued up to the date of the re-entry. The appellants did not waive the respondents’ breach by accepting some of the rent after August, as the parties had contracted out of waiver in the lease (para. 21.1).
[7] The order of the trial judge is therefore set aside and the application is dismissed. Costs of the appeal to the appellants fixed in the agreed amount of $9,750 inclusive of disbursements and HST. Costs awarded below in the amount of $27,000 to the respondents will now be paid to the appellants. . V Hazelton Limited v. Perfect Smile Dental Inc.
In V Hazelton Limited v. Perfect Smile Dental Inc. (Ont CA, 2019) the Court of Appeal considered the nature of a commercial lease:(a) Nature of a Commercial Lease
[27] Professor Anne Warner La Forest describes the nature of a landlord and tenant relationship at common law and some of the relevant terminology in Anger & Honsberger Law of Real Property, vol. 1, 3d ed. loose-leaf (consulted on 7 May, 2019) (Toronto: Canada Law Book, 2006) at §7:10:The relationship of landlord and tenant is an interest in land created by a contract, express or implied, by which one person who is possessed of an interest in real property, and who is called the “landlord” or “lessor”, confers on another person, called the “tenant” or “lessee”, the right to exclusive possession of the real property or some part of it for a period of time which is definite or can be made definite by either party, usually in consideration for a periodic payment of “rent” in either money or its equivalent. The interest in the property remaining in the landlord, being the interest which is not disposed, is called the “reversion”. The interest or estate which the tenant has in the land is known as the “term”. [Citations omitted; emphasis added.] [28] At common law, a lease has long been viewed as creating a property relationship between the lessor and lessee once the lessee goes into possession. A lease does not simply create a licence to occupy property; rather, it conveys a legal interest in the property: Jason Brock & Jim Phillips, “The Commercial Lease: Property or Contract?” (2001), 38 Alta. L. Rev. 989, at p. 990.
[29] Despite the property origins of leases, it is important to understand that a commercial lease also has contractual elements. The leading case on the dual nature of a commercial lease is the judgment of Justice Bora Laskin in Highway Properties Ltd. v. Kelly, Douglas and Co. Ltd., 1971 CanLII 123 (SCC), [1971] S.C.R. 562. Justice Laskin considered the issue of the availability of contractual remedies in a commercial lease. He took a practical approach to the issue, finding it “no longer sensible to pretend that a commercial lease … is simply a conveyance and not also a contract”: Highway Properties, at p. 576.
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