Leasing Tips

Leasing Tips by:  Harvey M. Haber, Q.C., J.D., LSM,

DSA, C. MED., C. ARB., B.A.
Retail, Office & Industrial Leasing,
Lease Interpretation, Mediation and Arbitration

Linkedin: http://www.linkedin.com/in/harveyhaber

 

Building Not a Fixture

Newfoundland and Labrador Housing Corp. v. Humby, 2103 NLCA 7, holding that a building designed to be dismantled and moved to another location is not a fixture and can be removed by a tenant.

Agreement to Agree

Japp Farms Ltd v. Kozicki Farms Ltd., 2012 SKQB 191, in which it was found that a court may enforce an agreement to agree in circumstances where it was reasonable for one party to rely on the other to negotiate any point that remained to be settled.

Exercise of Option Must Be Clear

Rinaldo Hair Stylist Ltd. v. bcIMC Realty Corp., 2012 ONSC 2831, affd 2013 ONCA 38, which held that the exercise of an option must be done in a manner that is clear, explicit and unequivocal.

Beyond Repair

Riocan Holdings Inc. v. Metro Ontario Real Estate Ltd., 2012 ONSC 1819, affd 2012 ONCA 839, which held that a tenant is not responsible under a covenant for repair for work that goes beyond repair and constitutes a capital improvement.

No Entitlement

Shanahan v. Turning Point Restaurant Ltd., 2012 BCCA 411, varg 2011 BCSC 956, which held that, where a tenant has paid a general deposit at the beginning of the lease, the tenant is entitled to have the general deposit applied to the rent mid-term when the tenant is late in paying rent, and the landlord is not entitled to terminate the lease for non-payment of rent.

Wait For A Lease

A tenant should not pay rental or open for business before signing a lease.

Replacement

Leases usually provide that the tenant must keep its premises and equipment in good repair, but leases often do not state who must replace the equipment when it breaks down and cannot be repaired. This is the cause of many disputes.

To avoid this, the lease should clearly state the respective obligations of the tenant and the landlord in regard to repairing or replacing equipment that the landlord supplies.

No Personal Name

A tenant should avoid putting a lease in its own personal name, if the tenant holds other assets in that name.

A tenant certainly does not want to lose its premises that way.

No Post Office Box 

If you are a landlord, avoid accepting a Post Office box as an address for a tenant.

Why?

Because many notices contain a time provision within it, and who knows how often that tenant opens its Post Office box.

Measurement

It is imperative for both a landlord and a tenant that the premises be measured by a professional land surveyor, as otherwise an overestimate by a landlord of 1 or 2 square feet, may cost the tenant thousands of dollars over the term of the lease.

Attention To Use Clause

Most tenants do not pay anywhere near enough attention to the permitted use clause that they should.

Why?

Because the use clause governs the tenant’s operation and it also governs the assignment clause.

The rule for a tenant’s use clause is “if in doubt, make it broader”, and for the landlord, that same rule becomes, “if in doubt, make it tighter”.

Fixturing Period

A tenant should make sure that when it is negotiating its original offer/lease, that the tenant discusses with its designer/builder in order to ensure that the tenant gives itself sufficient time for its fixtures and improvements to be installed, so that it can open for business in its premises.

Check It Out!

The last thing a tenant wants for a lease commencement date is a date when it cannot get anyone to work in the tenant’s premises.

My understanding is that it is often difficult to get trades to work in the period from December to January.

Options To Extend

A tenant should seek as many options to extend as it can possibly obtain.

A landlord, however, may either take the position that it does not grant options to extend or if it does, that it will consider one 5 year option on the same terms, except for rent which is to be agreed upon or arbitrated.

Tenant’s Allowances

Typically, there are 4 types of tenant’s allowance:

  1. A rent free period.
  2. A contribution towards the tenant’s fixtures.
  3. A cash payment.
  4. Works carried out on behalf of the tenant by the landlord.

Additional Rent

Many tenants do not pay anywhere near enough attention to the level of the items included as “additional rent”, that can be charged to them.

Guarantees

Most landlords, if they are not satisfied with the financial viability of the tenant, will seek an indemnity from a substantial client of the tenant, as a landlord is concerned as to the financial viability of the tenant.

Extended Indemnity

A tenant should, if it is required, provide a bank/personal guarantee for the first term of the lease, but should seek clarification in the lease that it will not be required to maintain any form of indemnity beyond the first term if the tenant extends the term of the lease.

Tenant’s Lease Legal Costs

A tenant should never negotiate its own lease.

It should always retain the services of an experienced lawyer who is thoroughly familiar with acting for tenants (not landlords).

It’s worth it for a tenant to do so.

Deposit

A tenant should be aware that its security deposit may not be refundable, no matter what happens.

Agreement To Lease

Both the landlord and the tenant should execute a lease, rather than just being satisfied with completing an agreement to lease.

Why?

Because an agreement to lease does not contain all of the provisions that are normally set out in the lease.

Draft Lease

A tenant should insist that it instruct its solicitor to provide the landlord with a draft lease in a fully marked up format, that is, clearly showing all deletions, insertions and alterations to the lease clauses.

And the landlord should undertake to provide its comments and any suggested alterations within 14 days of receipt of the draft agreement to lease.

Both parties should agree to execute the lease within the shortest possible time frame.  The landlord should agree to provide the tenant with a copy of the fully executed lease as soon as practically possible.

No Demolition Clause

A tenant should seek to insert into its agreement to lease or in the lease itself that no demolition clause is to be included either in the agreement to lease or in the lease.

Radius Clause

A tenant should seek to include in the agreement to lease or in the lease a clause prohibiting a “radius clause” which restricts the tenant from opening another business within a certain kilometer area from the premises.

Ontario’s Real Property Limitations Act

In McConnell v Huxtable (2014 O.J. No. 477), the Ontario Court of Appeal held that the ten-year limitation period outlined in Section 4 of Ontario’s Real Property Limitations Act applies to constructive trust claims that seek an interest in real property as they are “action(s) to recover land”.

The ruling also clarifies that the two-year limitation period of the Ontario Limitations Act, 2002 applies in unjust enrichment claims involving interests in assets not made up of real property, as well as for equitable claims generally, unless they are subject to a specific statutory exemption.

The result is that two different limitation periods will now apply to claims for unjust enrichment, depending on the nature of the property sought. Property such as pensions, shares and businesses will be subject to the two-year limitation period.

Good Faith

The Supreme Court of Canada released its landmark decision, Bhasin v Hrynew, 2014 SCC 71, in November of 2014 in which it held that, at common law, there is an organizing principle of “good faith” and an underlying duty of “honesty” in contract performance.

Restrictive Covenants

A tenant leased space in a shopping centre which provided that no other tenants would be authorized to sell, exchange and purchase new and used video games in the shopping centre. The landlord’s representatives informed the tenant that the landlord was about to lease space near the shopping centre to a major video store chain, which intended to operate a boutique specializing in the sale, exchange and purchase of new and used video games. The tenant brought a motion for declaratory judgment and permanent injunction, claiming that the landlord had violated the tenant’s restrictive covenant. The trial judge agreed and held that the landlord had violated the tenant’s restrictive covenant by leasing space in a shopping centre to a direct competitor of the tenant. The trial judge ordered the landlord to take the necessary steps to prevent the other video store chain from operating its boutique in the shopping centre. The landlord appealed; the appeal was dismissed, and the Quebec Court of Appeal agreed that the trial judge’s order should be upheld.

Renewals

While our courts continue to insist on strict adherence to the wording in a renewal provision in a lease, they may be inclined to relax the requirements where the conduct of the parties suggest it would be appropriate to do so.

A recent example is the 2007 case of Towcon Holdings Inc. v Pinnacle Millwork Inc. In it, the tenant had an option to renew its lease upon six months’ written notice provided it was not in default. The court found that the relations between the tenant and the former landlord had been informal, and that the tenant was not required to exercise the renewal option in writing. The court held that the conduct of the parties served to alter the express terms of the lease and the court concluded that the tenant had in fact exercised its option to renew for five years without the necessity of written notice. The landlord’s acceptance of rent amounted to a confirmation that the lease had been renewed.

But beware –the overwhelming amount of cases pertaining to renewal confirms that courts will strictly comply with the wording of the renewal provisions.

Trespass

A surrender clause in a lease required the tenant to deliver vacant possession of the premises at the end of the lease. The tenant, however, did not vacate but remained in possession of the premises despite the landlord’s notice to quit.

The application judge found that the tenant was an overholding tenant under the lease, and was therefore on a month-to-month tenancy and had been wrongfully locked out from the premises by the landlord.

The Ontario Court of Appeal held that although the overholding clause provided that a month-to-month tenancy would arise, the provision did not refer to the consent of the landlord. Without that consent, the tenant was bound by the terms of the surrender clause. The tenant was not unilaterally entitled to remain in the premises and no new tenancy was created. Having refused to deliver vacant possession of the premises at the end of the term of the lease, the tenant therefore became a trespasser.

The Ontario Court of Appeal allowed the landlord’s appeal, set aside the application judge’s order and dismissed the application with costs to the landlord.

Breach of Covenant for Quiet Enjoyment?

The British Columbia Court of Appeal allowed an appeal from a trial judge’s finding that a “creosote-like odour” in leased premises constituted a breach of the covenant of quiet enjoyment, which substantially deprived the tenant of the whole benefit of the lease.

There was no finding by the trial judge that the odour was caused by an act or omission of the landlord or someone acting on behalf of the landlord, the order was not of a “grave and permanent nature” and, in any event, the tenant had agreed the landlord would not be responsible for any defect in the premises, however caused.

The British Columbia Court of Appeal relied upon the 1990 decision of the same court in Furth v B.D. Management Ltd., 1990 Carswell BC 866, 73 D.L.R. (4) 375, [1990] B.C.J. No. 2035(B.C.C.A.) in which the court held that to establish a breach of the covenant of quiet enjoyment the tenant must show that the ordinary and lawful enjoyment of the premises is substantially interfered with by acts of the landlord and, moreover, that the interference is of a “grave and permanent nature”.

Statutorily Implied Covenant

Section 23(1) of the Ontario Conveyancing and Law of Property Act states that in a conveyance (which is defined to include a lease) for valuable consideration (for example, the payment of rent) there is an implied covenant for quiet enjoyment given by the landlord.

Thus, in Ontario and in any province with similar legislation, every lease (for valuable consideration) has implied within it a covenant for quiet enjoyment.

Distrain and Terminate? No!

I was always of the belief that where there was outstanding rent owing by a tenant, the landlord could distrain against the tenant’s goods, chattels and inventory, and if there was a balance left, the landlord could then terminate the lease. No longer! The British Columbia Court of Appeal recently addressed this question and in the case of Delane Insutry Co. Ltd. v PCI Properties Corp., the court held that having elected to distrain for the rent arrears, the landlord permanently and irrevocably waived its right to terminate the lease for those arrears.

The British Columbia Court of Appeal noted that in order to terminate the lease, a fresh default unrelated to the breach that led to the distress would be necessary.

Covenant

The Alberta Court of Queen’s Bench in the case of Equitable Trust Co. v. Lougheed Block Inc, (2013), ABQB 2092013 Carswell Alta 457, 77 Alta. L.R. (5th) (276) Alta. Q.B.at paragraph 37, held that a covenant is  a positive covenant when the covenantor promises to do something.  “A covenant is a negative covenant” when a covenantor promises to not do something.

Time of Essence

The Ontario Superior Court of Justice in a decision dated August 21, 2003-2329131 Ontario Inc. v. Carlyle Development Corp., 2013 OREG// 59001 held that when an agreement has a “time of the essence” clause and one party fails to make a deadline for closing, the other party may sue for damages provided that the other party was “ready, desirous, prompt and eager” to carry out the agreement.

Not Ready to Close

In the case of 2329131 Ontario Inc. v. Caryle Development Corp. 2013 OREG, the Ontario Superior Court of Justice noted that, pursuant to Domicile Developments Inc. v. MacTavish (1999), 45 OR (3d) 302 (Ont. C.A.), a party who is not ready to close on the closing date may rely on the “time of the essence” provision only if it gives reasonable notice setting out a new closing date and reinstating the clause.

Assignment For Different Use

A Tenant operating a fruit and vegetable store in the landlord’s shopping centre, requests landlord’s consent to assign its lease to a luggage store.

Landlord refuses its consent to do so.

Tenant responds that its lease provides that the landlord’s consent will not be unreasonably withheld to a transfer of its lease.

Landlord responds that there is case law that a use clause governs the assignment.

In other words, if the tenant wanted to assign its lease to another fruit and vegetable store, that would be okay, but for a different user that would not be okay.

The landlord, in any event, would be very concerned if it already had a luggage store in its shopping centre (but had not given the luggage store a restrictive covenant).

But what if the lease expressly provided that the tenant could assign its lease to a different use that did not conflict with any restrictive covenant given by the landlord to any other tenant in the shopping centre.

Under those circumstances, the landlord would be obliged to give its consent to the transfer.

Landlord’s Termination Right

A Tenant operating a fruit and vegetable store in the landlord’s shopping centre, requests the right to transfer, its lease to a luggage store.

The landlord responds by terminating the lease.

The tenant responds that its lease provides that the landlord’s consent is not to be unreasonably withheld to an assignment of its lease.

The landlord,  however, points out that the lease contains a provision whereby in the event of a request for an assignment, the landlord has three options, the first being to approve it, the second being to refuse it and third being the right to terminate the lease instead of giving its consent, and that the landlord is exercising the third option.

But, there is recent case law that has held that where a lease provides for a tenant to withdraw its request to assign its lease in the event the landlord refuses the request, and terminates the lease, then the court will not uphold the landlord’s right to terminate the tenant’s lease.

However, if the lease did not provide for the tenant to have the right to “step back” and withdraw its request, then the case in question provides that the landlord can effect a termination of the tenant’s lease, upon the tenant’s request to assign its lease.

Exclusives

Ronald A Goldenberg in his chapter entitled “Distinctive Features of a Shopping Centre Lease ” in “Shopping Centre Leases – 2nd Edition” (Publisher – The Cartwright Group Ltd. 2008,-Editor- in-Chief, Harvey M. Haber Q.C.) sets out that exclusive clauses give a tenant the exclusive right to sell certain products or carry on a certain business in the shopping centre, but that exclusive clauses are not as common as in previous years and are harder to negotiate as major tenants have significantly broadened their “permitted uses”.  Landlords and tenants are experiencing continuing problems as a result of overlapping uses by tenants.

Specialty Contract No Longer Applicable

A landlord should be aware that under the new Ontario Limitations Act, the 20 year limitation period for a landlord to bring an action against the Tenant for outstanding rent arrears, under what is called a “specialty contract” (a lease under seal is a specialty contract) is no longer applicable and the landlord’s claim against the Tenant is limited under the Ontario Real Property Limitations Act to six years from the date the outstanding rent arrears were due.

For example, a clause in the lease requiring a tenant to repair its premises is caught under the new Ontario Limitations Act in which the limitation period is two years from the date on which the claim is discovered or should have been discovered, but a claim for outstanding rent arrears by a landlord has a limitation period of six years.

Landlord’s Remedies

The following question should be considered by a landlord before taking action:

  1. Does the lease require specific notice to the tenant upon rent default before action may be taken by the landlord?
  2. Is there anything belonging to the tenant of value on the premises that is worth seizing by the landlord?
  3. Does the definition of “rent” in the lease include all money payable by the tenant under the lease?
  4. Does the lease provide for “accelerated rent” upon default (for the purpose of distress or bankruptcy)?
  5. Does the landlord wish to preserve or terminate the lease?
  6. Does the landlord have any security for the rent?
  7. Is the tenant a borderline bankrupt?
  8. Is the tenant a chain store?
  9. Is it better to maintain the tenancy? Can a new arrangement be negotiated to meet the needs of both the landlord and the tenant?
  10. Is the tenant a major tenant and what would be the effect of losing such a tenant?
  11. Is the tenant a viable entity and can it continue to operate?
  12. Are there any guarantors or indemnitors of the lease?
  13. What is the likelihood of re-letting that premises and at what cost?
  14. If the landlord wishes to terminate the lease, what is the likelihood of the tenant resisting and creating expensive litigation? Can a surrender agreement be negotiated with the tenant to avoid any potential litigation?

Monetary Default

When a tenant defaults in the payment of rent under its lease, the landlord has the right to:

  • (i) Negotiate a solution (such as a surrender of the lease) – this does not terminate the lease, unless the parties agree to it;
  • (ii) Seize (e.,”distrain”) the goods of the tenant (or any person liable for the rent, such as an assignee, i.e., a third party to whom the lease has been assigned, or a guarantor or indemnitor) on the premises for the rent arrears. If the lease specifically permits the landlord (in the event of a default by the tenant) to claim accelerated rent for an additional three months, this accelerated rent, upon such default, may then be added to the tenant’s rent arrears for the purpose of seizing the tenant’s goods – this does not  terminate the lease, if done properly;
  • (iii) Take security for the rent arrears by way of a guarantee, indemnity, bond, letter of credit or a security interest pursuant to the Ontario Personal Property Security Act, R.S.O. 1990, c. P.10 (“PPSA”) – this does not terminate the lease;
  • (iv) Insist that the tenant perform the terms of the lease and sue the tenant (if need be, on a monthly basis) for the rent as it becomes due – this does not terminate the lease; or
  • (v) Terminate the lease with proper notice, sue the tenant for the rent arrears and also claim damages for losing the benefit of the lease for the unexpired balance of the term – this does terminate the lease.

 

Non-Monetary Default

Where the tenant has breached some covenant in its lease other than the covenant to pay rent, the landlord has different remedies.  The landlord may:

  • (i) Commence legal proceedings for a court order to require the tenant to comply with the terms of the lease (“specific performance”) and to compensate the landlord for any damages resulting from the breach – this does not terminate the lease;
  • (ii) Commence a court action for damages for breach of the particular covenant – this does not terminate the lease;
  • (iii) Commence a court action or application for an injunction to restrain the tenant from breaching the covenant – this does not terminate the lease;
  • (iv) If the original tenant has vacated the premises, the Landlord should give the tenant written notice that the landlord is re-entering the premises on the tenant’s behalf, as the tenant’s agent, without terminating the lease, for the purpose of re-letting the premises to a new tenant on the original tenant’s account. The landlord then may commence legal proceedings against the original tenant for any rent arrears plus any difference in the rent charged to the new tenant and the rent due under the original lease.  This does not terminate the lease, although, if the landlord, in re-letting the premises, changes certain fundamental terms of the lease (e.g., extending the term beyond the original term of the lease), a tenant may successfully argue that, by doing so, the landlord has terminated the lease and ended the tenant’s liability as of the date of termination;
  • (v) Commence a court action for declaratory relief that the lease has ended and for possession of the premises – this does terminate the lease; or
  • (vi) Terminate the lease with proper notice and claim damages for losing the benefit of the lease for the unexpired balance of the term – this does terminate the lease.

 

Terminating the lease

One of the most important initial determinations a landlord must make before choosing a remedy, is to decide whether or not to terminate or preserve the lease, as that will play a major role in the landlord’s choice of remedy.

If the landlord decides to terminate (“forfeit”) the lease and obtain possession of the premises, it may do so in any one of the following ways:

  • (i) Physically re-entry (e., by the landlord or its representative actually physically re-entering the premises and changing the locks);
  • (ii) Upon written notice to the tenant (given pursuant to the Supreme Court of Canada decision, Highway Properties Ltd., v. Kelly Douglas & Co. (1971), 17 D.L.R. (3d) 710, [1971] S.C.R. 562, [1972] 2 W.W.R. 28)), terminate the lease and claim the rent arrears plus damages for losing the benefit of the lease for the balance of its term – the landlord would then commence a court action for the arrears and damages.

 

Mitigation lost

A key issue to remember in deciding whether to terminate the lease is that, once the lease is terminated and notice given (pursuant to the Kelly Douglas case), the landlord has the obligation to mitigate the landlord’s losses if the landlord wishes to pursue a claim against the former tenant.  That’s important, as once the landlord terminates the lease, it can no longer distrain against the tenant’s goods for rent arrears.  In other words, once the landlord terminates the lease (having given the proper notice to the tenant), it must mitigate its damages by endeavouring to locate a new tenant, lease the space and offset against the amount owing by the tenant, the amount it receives from the new tenant:

  • (i) Commence a court action (by a statement of claim) for a declaration that the lease has ended and for possession of the premises by the landlord. In this court action, the landlord can combine a claim for possession of the premises with a claim for rent arrears or damages, or both;
  • (ii) Apply to the court for a writ of possession (an order of the court for possession of the premises) under Part III of the Ontario Commercial Tenancies Act (the “Act”), or its equivalent, and for termination of the lease. This is a summary procedure for evicting a tenant who wrongfully refuses or neglects to vacate the premises upon the termination or expiry of its lease.  Unfortunately, the landlord cannot combine an action for possession under Part III of the Act with a claim for rent arrears or damages; or
  • (iii) Terminate the tenancy by written agreement with the tenant, in which event rent is paid by the tenant to the date of termination, unless otherwise agreed between the parties.

Distress

The landlord’s remedy of distress is the landlord’s right, upon a tenant’s rent default, without notice (unless the lease provides for it), to seize and hold the tenant’s goods, chattels and inventory, as security for rent arrears and, if the rent remains unpaid, to sell the goods and apply the proceeds on account of the rent arrears.  This right is available only if the following conditions are met:

  • (i) There must be a landlord and tenant relationship (a lease or agreement to lease premises at a fixed rent). “Landlord” is defined in the Ontario Commercial Tenancies Act Revised Statutes of Ontario 1990 C.L. 7;
  • (ii) The tenant must be in possession of the premises;
  • (iii) There must be rent arrears due and payable by the tenant to the landlord; and
  • (iv) If the tenant is in arrears and continues to remain in possession of the premises after the lease has ended, the landlord (as long as the landlord continues to hold title to the land on which the leased premises are situated) has the right to seize the tenant’s goods, chattels and inventory, for a period of up to six months after the end of the term. But this six-month right of the landlord does not apply where the landlord has terminated the lease.

Who has Security?

Distress is a self-help summary remedy (i.e., it may be exercised by the landlord or its agent without the need for the landlord to first go to court), which arises on non-payment of rent by a tenant.  It has been affirmed by the Ontario Court of Appeal in Commercial Credit Corp. Ltd. v. Harry D. Shields Ltd. (1981), 122 D.L.R. (3d) 736, 32 O.R. (2d) 703, 14 B.L.R. 121, 1 P.P.S.A.C. 301 (C.A.), and also by the Ontario Court of Appeal in Leavere v. Port Colborne (City) (1995), 122 D.L.R. (4th) 200, 22 O.R. (3d) 44, 79 O.A.C. 16, 25 M.P.L.R. (2d), 9 P.P.S.A.C. (2d) 78, that while a right of distress is not itself a lien on the goods, a lien on them comes into existence when the person exercising a right of distress actually or constructively takes possession of the goods.  This lien arises not by statute but by operation of law as an incidence of the relationship of landlord and tenant.  Under s. 4(1)(a) of the Personal Property Security Act,  R.S.O. 1990, c. P. 10 (“PPSA”), liens created by statute or by operation of law are excluded from the provisions of the PPSA.

Therefore, in a dispute between a landlord under its right of distress and a secured creditor whose security interest has been registered and perfected under the PPSA, the landlord’s right of distress has priority, subject, however, to certain exceptions, such as those   set out in s. 31(2) of the Ontario Commercial Tenancies Act.

Who does distress apply to?

Distress is incorporated into, and governed by the Ontario Commercial Tenancies Act (the “Act”). The Act sets out the parties and the “goods” against which distress may be exercised, and provides for statutory remedies available to tenants and other parties affected by the distress.  It is important to note that in Ontario the right of distress does not apply to residential promises. It applies to commercial premises, such as shopping centres, offices, warehouses and industrial premises.

A landlord should be aware that it may contract out of the distress provisions of the Act.  But a landlord should be very reluctant to waive its right of distress.

 

Notice to Tenant’s Solicitor

A landlord wants to send notice of default to the tenant and has noted that the tenant has a solicitor acting for the tenant.

The lease provides that the notice must be sent to the tenant.

Should the landlord also send the notice to the tenant’s solicitor?

Of course.

Fundamental Breach

A fundamental breach is a breach which deprives the innocent party of substantially the whole benefit of the contract. The Ontario Court of Appeal, in 968703 Ontario Ltd. v. Vernon set out the following five factors for determining whether there has been a fundamental breach: (1) the ratio of the party’s obligations not performed to the obligation as a whole; (2) the seriousness of the breach to the innocent party; (3) the likelihood of repetition of such breach; (4) the seriousness of the consequences of the breach; and (5) the relationship of the part of the obligation performed to the whole obligation.  These factors were later adopted in Spirent Communications of Ottawa Ltd. v Quake Technologies (Canada) Inc. in the context of landlord and tenant leases.

Additional Changes

An attempt to impose terms other than those contemplated in an agreement to lease may   constitute a fundamental breach of the lease. See Canadian National Railway v. Huntingdon Real Estate Investment Trust, [2013] 8W.W.R.345 (Man. C.A.).

No Right to Distrain

If a landlord elects to forfeit (i.e. terminate) a lease due to a tenant’s default, the landlord is not entitled to distrain (i.e., to seize the tenant’s goods, chattels and inventory on the leased premises for outstanding rent arrears).

Courts Jurisdiction

Section 98 of the Courts of Justice Act confirms the courts equitable jurisdiction and provides it with a broad jurisdiction to grant relief against penalties and forfeitures, on such terms as are considered just through compensation or otherwise. This Section appears to be broader than a tenant’s or subtenant’s remedies pursuant to Sections 20(1) or 21 of the Commercial Tenancies Act of Ontario.

No Legal Duty To Repair 

At common law, a landlord has no implied legal duty to repair commercial premises even if the landlord is aware of a proposed usage that will require modifications to the existing premises. Part III of the Residential Tenancies Act of Ontario provides extensive protection in this regard for residential tenants, but in the case of a non-residential tenancy, a landlord  is obliged to do only that of which has covenanted (to do).

No Duty To Elect

The Tenant should remember that if the landlord does not elect to terminate the lease following a tenant’s default, the landlord is under no duty to mediate its damages, so long as the lease remains in effect.

No Restrictions

In the absence of any restrictions, a tenant is free to transfer (i.e. assign) its lease or the leased premises, but, most leases invariably contain restrictions under the tenant’s right to assign its lease.

Prohibition On Lottery Tickets  

The Tenant’s lease provides that it is prohibited from using its premises for a “the sale of any form of lottery participation”.

This is due to the fact that the landlord may only authorize its designated number or numbers of store in the shopping centre entitled to sell lottery tickets.

The landlord does not want a proliferation of stores selling lottery tickets in the shopping centre.

Type of Food 

A landlord should attempt to delineate the type of food being sold by the tenant in the tenant’s premises. For example “French”, “Italian” or “Greek”. A tenant should attempt to modify any delineation by the edition of the word “style” so that it is, for example “French – Style”, which is much broader.

Principal/Ancillary

A landlord must distinguish between the principal use and the ancillary use of the tenant’s premises. For example, the landlord may want the sale of alcohol beverages to be an “ancillary” and not a “principal” us.