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RTA - Option to Renew

. Shnier v. Begum

In Shnier v. Begum (Div Court, 2023) the Divisional Court considered an RTA eviction appeal where the issue was whether a contractual yearly renewal option prohibits the landlord from serving a personal possession termination on the annual renewal:
Did the Board err by failing to interpret the language of the renewal provision in the lease with reference to the correct principles of contractual interpretation?

[16] The Appellant submits that the Board’s reasons show that it neither identified nor applied the relevant principles of contractual interpretation to the question of what the renewal provision in this lease meant. These include the principles of contra preferentum, seeking an interpretation which makes commercial sense and avoids absurdity or redundancy and the requirement that it reads the terms in the context of the whole agreement.

[17] The portion of the Board’s reasons concerning the renewal provision and the timing of the Respondent’s notice to reoccupy are as follows:
1. The Tenant submits that there is an agreement that the Tenant has the option to renew the tenancy agreement for a one-year term is [sic] he exercises his right to do so. The tenancy agreement under Schedule A states “The Landlord and Tenant agree that the lease may be renewed for a further period of one year on the same terms and conditions at a mutually agreed upon rent, with the Tenant having the option to terminate the Lease by giving 60 days notice to the Landlord. The 60 days period would be counted from the last day of the month”.

2. The Tenant argues that he provided the Landlord with 60 days notice and therefore the end of the term would be November 30, 2022 and not the termination date on the notice of November 30, 2021.

3. I note that the wording of Schedule A says the lease “may” be renewed. The word suggests that this is not mandatory for either party to agree to this renewal period. This Schedule also states that it is renewed at a mutually agreed upon rent which could be contrary to the provisions of the Residential Tenancies Act for a rent increase which the Act limits.

4. To accept the Tenant’s position on this point would mean that the Tenant could stay in the rental unit indefinitely, if the Landlord wanted to move in for their own use, should he have the unilateral ability to renew the tenancy agreement as suggested.

5. In addition, the Landlord served the notice on August 13, 2021. The Tenant’s email showing his request to renew for a on-year term was sent on August 30, 2021. At the time the notice was sent the end of the term was November 30, 2021.

6. I find the Landlord chose not to agree to the extension of the tenancy for a one-year term and that at the time the notice was served the end of the fixed term was November 30, 2021.
[18] The essence of the Appellant’s submission is that the renewal provision was complex, ambiguous, and required more than the cursory analysis found in the Board’s reasons. I disagree. Although I agree with counsel for the Appellant that this was not a lengthy analysis, the reasons sufficiently demonstrate that the Board interpreted this contractual provision by reading the words of the text and considering them in the context of where they appeared, in a residential lease agreement. This accords with a fundamental principle of contractual interpretation: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 57.

[19] The Board focused on the sole provision which addressed the ability of the parties to renew the lease for a further year. It set out and understood the nature of the lease and the wording of the renewal term. The Board noted the permissive language of the provision by virtue of the use of the word “may.” The Appellant did not provide any examples of other provisions that would logically bear on alternative interpretations of this renewal provision. Although counsel submitted that this provision could be read as mandatory at the election of the tenant, the words of the provision do not say that. The use of the word “may” to describe the renewal, and the addition of a “mutually agreed upon rent” suggest that the renewal is subject to further agreement, and that this provision does not exist for the sole benefit of the tenant who may elect to renew without the agreement of the landlord.

[20] The Board concluded that the renewal provision was clear. It is implicit in the Board’s reasons that it did not find this term to be ambiguous. That conclusion does not amount to evidence of a failure to apply the principle of contra preferentum, that is the principle that an ambiguous term will be resolved in favour of the person who has not drafted the contract. Rather, it is the logical result of the Board’s finding that the wording was clear, and supported the finding that the parties could extend the lease, on terms satisfactory to the parties for a further year period.

[21] The Appellant also submitted that the provision as interpreted by the Board is redundant and does not make commercial sense, because the parties did not need to stipulate that they could agree to a further term. Again, I disagree. The provision regularizes and recognizes the ability of the parties to agree to an extension, to agree on rent to be paid during the period of extension (leaving aside for now the potential for unlawful rent being agreed upon given Ontario’s legislated rent regime, which is discussed below) and permitted the tenant the ability to be relieved from the lease on 60 days’ notice.

[22] In reviewing the provision and the reasons, I conclude that there is no “extricable error in law” revealed by the Board’s decision. As the Supreme Court has noted in Sattva at para. 47, “the interpretation of contracts has evolved towards a practical common-sense approach that is not dominated by technical rules of construction.” On my reading of the reasons, the Board read and understood the provision in its ordinary and grammatical meaning, required by the case law: See Sattva at para. 46.

[23] Thus, I find that the Board did not err in law in making its findings on the meaning of the lease renewal provision.


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Last modified: 05-10-23
By: admin