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Landlord and Tenant (Commercial) - Exclusive Possession. 720443 Ontario Inc. v. 2682543 Ontario Inc.
In 720443 Ontario Inc. v. 2682543 Ontario Inc. (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from a finding that the tenant "repudiated the lease for premises to be fixtured by the tenant and operated as a restaurant, and that the respondent landlord, 720443 Ontario Inc., properly accepted the tenant’s repudiation and terminated the lease".
The case involves a concept of simultaneous 'joint occupancy' between the landlord and tenant, which seems contradictory to the L&T principle of 'exclusive possession':Joint Occupancy
[5] First, the tenant argues that the trial judge erred in finding that the lease permitted a period of joint occupancy by the landlord and tenant. While the landlord’s forces completed the work required under the lease to ready the premises for the tenant, the tenant’s forces could begin their work with a period of overlap.
[6] The premises comprised a gutted, empty unit, and the parties understood that the space required a significant amount of work before the tenant could open a restaurant. One of the purposes of the lease was to delineate which party was responsible for completing each necessary task. These were outlined in Schedule C to the lease.
[7] By letter dated November 28, 2019, the landlord advised the tenant that it was completing its required work under the lease and the premises would be ready for the tenant to take possession on January 2, 2020. On January 20, the landlord advised the tenant that it was extending the date to February 3, 2020. In the ensuing weeks, the COVID-19 pandemic arrived.
[8] The tenant took the position that it was not obliged to take possession of the premises until all of the landlord’s work was completed. There is no real dispute that, despite the landlord’s prospective deadlines, the landlord had not completed sufficient work to permit the tenant to begin fixturing the space. It is common ground that, by mid-April 2020, the landlord’s work was sufficiently advanced for the tenant to begin fixturing.
[9] The tenant did not take possession or begin the fixturing process. The landlord eventually rented the premises to a new tenant in the summer of 2021, mitigating its damages.
[10] The tenant argues that the language of Schedule C meant that it had no obligation to begin the fixturing period until the landlord had completely finished all of its work. The tenant argues that it was not obliged to undertake “joint occupancy” with the landlord.
[11] The concept of “joint occupancy” is not express in the lease, but it is explicitly mentioned in another lease the landlord entered into around the same time with a third party. The tenant argues this other lease forms part of the factual matrix. The implication is that the inclusion of that provision in the other lease and the absence of that provision in the lease under appeal means that the tenant was permitted to wait until the landlord had completed all of its work. The tenant’s argument is that the lease’s silence as to “joint occupancy” means that it could not be implied. But, in questioning from the bench, counsel agreed that the lease can be interpreted to contemplate that the forces of both the landlord and the tenant might be on the premises as the landlord was completing its work and the tenant was proceeding to fixture. We do not see the term “joint occupancy” to be a technical term of art that has any relevance to the analysis.
[12] The trial judge rejected the tenant’s argument, noting, at para. 31:The text of s. 3.01.1 poses a significant problem for the tenant’s interpretation of the lease. The tenant submits that Schedule C means that it had no obligation to begin the Fixturing Period until the landlord had completely finished all of the landlord’s work. That interpretation is difficult to reconcile with s. 3.01.1, which expressly states that the landlord need not complete all of its work prior to the commencement of the Fixturing Period. Rather, the landlord needed only to complete its work “to a state sufficient to permit the Tenant to commence fixturing.” This clause strongly suggests that the parties agreed that there would be circumstances where the tenant and the landlord could each be working on their tasks at the same time. [13] The trial judge added, at para 33:Section 13.02.2(c) clearly contemplates the tenant and the landlord completing their work at the same time. First, the lease expressly gives the landlord the right to require the tenant’s work prior to the completion of the landlord’s work in any case where the nature or state of the work causes the landlord to consider it necessary or desirable. Second, the lease requires the tenant to ensure that its contractors and employees complete the tenant’s work without interfering with the landlord’s contractors and employees:
13.02.2(c) Prior to commencement of any work on the Leased Premises by or on behalf of the Tenant, the Tenant shall submit to the Landlord complete drawings and specifications which shall be subject to the Landlord’s approval, such approval not to be unreasonably withheld. The Tenant’s Work shall be performed at the expense of the Tenant and the Landlord shall have the right to require the Tenant to perform part of the Tenant’s Work prior to completion of the Landlord’s Work in any case where the nature or state of the work is such that the Landlord considers it necessary or desirable to do so. The Tenant’s Work shall be carried out in a good and workmanlike manner and be subject to the approval of the Landlord. During the time that the Tenant is in occupancy of the Leased Premises for the purpose of carrying out the Tenant’s Work, but prior to the Commencement Date, it shall be bound by all of the provisions of this Lease, except those requiring payment of rent or contribution in respect of taxes and operating costs, the Tenant shall, however, pay for the cost of all utilities consumed by it with respect to the Leased Premises. The Tenant shall cause its employees and contractors to do their work so as not to interfere with the Landlord’s contractors and employees. [Emphasis in original.] [14] We see no error in the trial judge’s interpretation. . Metro Ontario Real Estate Limited v. Embee Properties Limited
In Metro Ontario Real Estate Limited v. Embee Properties Limited (Ont CA, 2023) the Court of Appeal considered that a key element of a lease is that of 'exclusive possession':[15] With respect, the application judge erred in law in finding that Metro holds a leasehold proprietary interest in the common parking area. A leasehold proprietary interest arises under the terms of a binding lease agreement and provides a tenant with an exclusive right to possess, occupy, and use the property in question. This right exists against all of the world, including the landlord, meaning that any interference by a landlord with the property will constitute a trespass: Wal-Mac Amusements Ltd. v. Jimmy’s Dining & Sports Lounge, 1997 ABCA 183, at paras. 15-17; Exchange Corporation Canada Inc. v. The Corporation of the City of Mississauga et al., 2012 ONSC 6221 (Div. Ct.), at para. 22, citing Re B.A. Oil Co. & Halpert, 1959 CanLII 125 (ON CA), [1960] O.R. 71 (C.A.), pp. 80-81. In the case at bar, the critical element of exclusivity was absent because all of the tenants in the shopping centre have a right to use all of the parking spots for their customers.
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