Simon's Megalomaniacal Legal Resources

Landlord and Tenant (Commercial) - Notices

. Bennett Law Chambers Professional Corporation v. Camcentre Holdings Inc.

In Bennett Law Chambers Professional Corporation v. Camcentre Holdings Inc. (Ont CA, 2022) the Court of Appeal considered the adequacy of a notice to terminate a commercial lease in light of the lease terms:

[13] The application judge commenced his analysis by referring to the legal principles from two authorities, Goodyear Canada Inc. v. Burnhamthorpe Square Inc. (1992), 1998 CanLII 6091 (ON CA), 41 O.R. (3d) 321, 166 D.L.R. (4th) 625 (C.A.), and Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633. He noted that in Goodyear, the Court of Appeal held that courts should take a flexible approach to notices to terminate a commercial tenancy if there is doubt regarding the termination date. In Sattva, the Supreme Court of Canada set out principles for interpretation of commercial agreements. The application judge referred to three: (1) taking a practical non-technical approach to determining the intentions of the parties; (2) reading the contract as a whole consistent with the circumstances of the parties when it was formed; and (3) employing contextual factors that make up the factual matrix including the purpose of the agreement and the relationship between the parties: Sattva, at paras. 46-47.

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[28] The application judge correctly referred to Goodyear, the governing case on the proper approach to interpreting and enforcing a notice to vacate a commercial lease, and to Sattva, the governing case on the proper approach to the interpretation of commercial contracts.

[29] In Goodyear, the commencement date of the lease was unclear, and therefore the date of termination was also unclear. The application judge determined the commencement date, then found that because the notice period chosen did not end on the anniversary of the commencement of the lease, it was non-compliant with the requirement to give 6 months’ notice of termination: Goodyear, at para. 86.

[30] On appeal, the Court of Appeal for Ontario articulated a new and different approach to the interpretation and application of notices to vacate commercial tenancies, mandating a flexible test rather than a technical one, “preferring… fairness over technicality”: Goodyear, at paras. 88-89. The court quoted from the House of Lords decision in Mannai Investment Co. Ltd. v. Eagle Star Life Assurance Co. Ltd., [1997] 2 W.L.R. 945, [1997] A.C. 749 (H.L.), at p. 962:

[T]he inquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind. It follows that one cannot ignore that a reasonable recipient of the notices would have had in the forefront of his mind the terms of the leases.

[31] While this case dealt with flexibility on the date for termination of the lease, the principle articulated by the court is one of general application, as demonstrated by the quoted paragraph from the House of Lords decision. The issue is whether the recipient of the notice would have understood what was intended by the notice.

[32] In Sattva, the Supreme Court of Canada articulated a similar approach to the interpretation of contracts, referring to a practical, “common-sense approach not dominated by technical rules of construction” where the “overriding concern is to determine ‘the intent of the parties and the scope of their understanding’”: at para. 47, citing Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27.

. Martin v. Mailhot

In Martin v. Mailhot (Ont CA, 2020) the Court of Appeal allowed a landlord appeal where the tenant had argued successfully at the court below that the landlord's notice of (non-rent) breach [under s.19(2) of the Commercial Tenancies Act] was defective for failure to specify the amount of money to be paid to remedy the breaches:

(1) Did the application judge err by requiring the appellant to provide a demand for monetary compensation?

[9] Section 19(2) of the Commercial Tenancies Act provides that:

A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease, other than a proviso in respect of the payment of rent, is not enforceable by action, entry, or otherwise, unless the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and, in any case, requiring the lessee to make compensation in money for the breach, and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach. [Emphasis added.]

[10] The purpose of the notice requirement in s. 19(2) is “to warn the tenant that its leasehold interest is at risk and to give the tenant an opportunity to preserve that interest by remedying the breaches complained of and, where necessary, by compensating the landlord”: 780046 Ontario Inc. v. Columbus Medical Arts Building Inc. (1994), 1994 CanLII 1188 (ON CA), 20 O.R. (3d) 457 (C.A.), at p. 464. Courts have insisted on strict compliance with this requirement: Columbus, at p. 464; Jay-Pee Drycleaners Inc. v. 2321324 Ontario Inc., 2017 ONCA 798, at para. 19.

[11] The issue in this appeal is the precise nature of the requirement for “compensation in money” as outlined in s. 19(2).

[12] This issue was addressed by this court in Chick ‘N Treats Inc. v. Woodside Square Ltd. (1990), 38 O.A.C. 138 (C.A.). In that case, the tenant breached the lease by failing to maintain accurate monthly statements of gross revenue and make them available to the landlord. On appeal, the tenant argued that the landlord’s notice of breach was invalid as it had not included a demand for monetary compensation. The court rejected this argument at paras. 6 to 8 of its reasons:

In our opinion, the additional requirement that the lessee make compensation for the breach cannot be mandatory, because the resulting obligation on the lessee to make reasonable compensation to the satisfaction of the lessor would be nonsense in situations, such as this in the case on appeal, where the breach is not quantifiable. We believe that it is a requirement of the notice if the landlord requires compensation in addition to remedying the breach, but it is one that can be waived.

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It appears to us that in a situation where the breach is capable of remedy and the landlord has suffered damage which is compensable [in] money, then the landlord must assert both remedies in his notice if he intends to insist on satisfaction with respect to both, failing which, he will exercise his right of re-entry or forfeiture. [Emphasis added.]

[13] A demand for monetary compensation is never required for valid notice under s. 19(2). Rather, the requirement may be waived at the discretion of the landlord. A demand for monetary compensation is only necessary where, as a result of the breach, the landlord has suffered damages compensable in money and intends to insist on recovery, failing which, they will exercise their right of re-entry or forfeiture. In other words, where a landlord has suffered damages compensable in money and they fail to include a demand for monetary compensation in their notice of breach, they will be barred from relying on a tenant’s failure to compensate them for those damages as a justification for re-entry or forfeiture. In this way, a tenant will only be required to provide monetary compensation to preserve their leasehold interest where it is deemed necessary by the landlord in the notice of breach.

[14] In this case, the appellant argues that, pursuant to the decision in Chick ‘N Treats, and contrary to the findings of the application judge, the September 19, 2017 notice was valid, as she was entitled to waive the requirement in s. 19(2) for a demand for monetary compensation.

[15] I agree. The September 19, 2017 notice warned the respondents that their leasehold interest was at risk. It specified the breaches complained of and requested that they be remedied. It was within the purview of the appellant to decide to waive the requirement for a demand for monetary compensation. Her decision to refrain from including such a demand did not invalidate the notice. It merely foreclosed the option of insisting on recovery for any damages that flowed from the breach as a necessary condition for the preservation of the respondents’ leasehold interest. The notice was valid and the application judge erred in finding otherwise.