Category: Real Estate Law

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Commercial Real Estate Real Estate Law

Courts Continue to Consider Relief from Forfeiture Cases Due to COVID-19

Public health regulations serving to stop the spread of COVID-19 have been an ongoing challenge for brick-and-mortar businesses that have struggled to remain afloat in the face of numerous closures. As a result, the courts continue to see a slew of cases relating to relief from forfeiture. In a previous blog, we discussed the specific case of Cherry Lane Shopping Centre Holdings Ltd. v Hudson’s Bay Company ULC Compagnie De La Baie D’Hudson Sri, where a British Columbia court ruled that the tenant, Hudson’s Bay Company (“HBC”), was required to pay rent despite the COVID-19 pandemic. However, the court also granted HBC relief from forfeiture, provided it pay rent as due. As we continue to see such relief from forfeiture cases, in this blog we consider the state of the law and the factors the courts consider in deciding whether to grant this equitable remedy.

What is Relief from Forfeiture?

Relief from forfeiture is an equitable remedy. It gives the court the power to excuse a party from the application of forfeiture which would otherwise operate against that party as a result of their failure to perform a covenant or a condition in a contract, or when a mistake has been made. In the commercial tenancy context, this failure to perform is typically the inability to pay rent.

The Power to Grant Relief from Forfeiture

In Ontario, the court’s authority to grant relief from forfeiture is found in subsection 20(1) of the Commercial Tenancies Act, which states:

Relief against re-entry or forfeiture

20 (1) Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture, whether for non-payment of rent or for other cause, the lessee may, in the lessor’s action, if any, or if there is no such action pending, then in an action or application in the Superior Court of Justice brought by the lessee, apply to the court for relief, and the court may grant such relief as, having regard to the proceeding and conduct of the parties under section 19 and to all the other circumstances, the court thinks fit, and on such terms as to payment of rent, costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future as the court considers just. 

  The court also has jurisdiction to grant relief from forfeiture pursuant to section 98 of the Courts of Justice Act which provides:

Relief against penalties

98 A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.

Factors Considered in Granting Relief

In assessing this form of relief, courts look at the entirety of the relationship between the parties, with regards to three primary criteria:

  1. The conduct of the applicant and the gravity of the breaches
  2. Whether the object of the right of forfeiture in the lease was essentially to secure the payment of money
  3. The disparity or disproportion between the value of the property forfeited and the damages caused by the breach

Courts will also consider the following factors:

  • The history of the relationship
  • Breaches of other covenants of the lease by the tenant
  • The tenant’s conduct or misconduct
  • Its good faith or bad faith or want of clean hands

In British Columbia, the court has also considered whether there are any intervening third-party rights.

In considering all of the above factors the court has previously stated:

What should not be lost sight of is that a landlord undoubtedly is always going to be able to point to misconduct by the tenant, else there would be no grounds for forfeiture in the first place, but the ultimate question is whether the court should exercise its equitable jurisdiction to relieve against the forfeiture imposed by the common law because it is an excessive remedy in all the circumstances.

Relief from Forfeiture for Non-Payment of Rent

In a situation where the default is based upon non-payment of rent, the court has stated it should consider the following criteria: (a) whether the tenant comes to court with clean hands; (b) whether there has been an outright refusal to pay rent; (c) whether the rent has been in arrears for a short or long time; and (d) whether the landlord has suffered a serious loss by reason of the moving party’s delay in paying rent

In situations of non-payment of rent, a court will generally grant relief from forfeiture if the tenant can make full payment of their arrears and continue payment of rent. As Justice Laskin has previously stated:

Assuming power in the Court to relieve against forfeiture for non-payment of rent in the present case, there is no good reason to refuse such relief when the landlord can be made whole by money payments and terms can be imposed, as they were, to require regularity in making payments on the due dates.

In one of the first cases in the pandemic dealing with relief from forfeiture, the courts demonstrated a willingness to consider rent defaults in the context of the pandemic in deciding whether to exercise their discretion to grant relief. While courts have been sympathetic to commercial tenants who have suffered as a result of the pandemic, they generally will not grant relief from forfeiture where such tenants were already in default pre-pandemic and where the tenants were not able to demonstrate that they could continue to meet their obligations under the lease. 

Serious Equitable Remedy to be Used Only Where Necessary

The courts have recognized that forfeiture is a very serious remedy. It is purely discretionary, fact-specific, and should be avoided where appropriate unless the tenant’s behaviour has been “persistent, substantial or reprehensible.”

A landlord, therefore, cannot terminate a lease for just any breach. Rather, a tenant’s misconduct must be of sufficient gravity to warrant termination.

Contact the Commercial Real Estate Lawyers at Baker & Company in Toronto for Assistance with a Commercial Lease

Closures due to the COVID-19 pandemic continue to present unique challenges for businesses. At Baker & Company, our team of commercial real estate lawyers has significant experience advising both landlords and tenants with respect to issues arising from commercial leases. To speak with a lawyer, contact us online or by phone at 416-777-0100.

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Commercial Leases

Court Refuses to Stay Litigation Despite Arbitration Provision in Commercial Lease Dispute

An arbitration clause is a clause in a contract that requires the parties to resolve any disputes through arbitration, rather than proceeding through the courts.

While many commercial lease disputes are resolved in the courts, a recent Ontario case considered the impact of an arbitration clause in a commercial lease on the parties’ dispute.

Parties Enter Into Commercial Lease with Arbitration Provisions

In October 2017, the landlord and the tenant entered into a commercial lease for premises in Toronto. The term of lease began on November 1, 2017 and was set to expire on December 31, 2022.

The lease required the tenant to pay monthly base rent, as well as monthly additional rent.

The lease also contained arbitration provisions.

Tenant’s Business Impacted by COVID-19 Pandemic, and Tenant Ceases to Pay Rent

The tenant paid the rent required for over two years. However, the COVID-19 pandemic impacted the tenant’s business, causing the tenant financial difficulties.

Initially, the landlord and tenant worked together to address the problem. The landlord was prepared to defer some rent, and it initially worked with the tenant to apply to the Canada Emergency Commercial Rent Assistance Program so that the tenant could obtain some relief. 

However, following failed negotiations to terminate the lease, the tenant made some rent payments late and eventually stopped paying the rent entirely beginning in January 2021.

Landlord Commences Court Action and Tenant Attempts to Stay in Favour of Arbitration

As a result, the landlord commenced a court claim seeking the amounts it claimed were owing to it under the lease, consisting of arrears of base rent and arrears of additional rent. The landlord made no attempt to take possession of the leased premises, instead electing to treat the lease as ongoing.

In response, the tenant initially served the landlord with a Notice of Intent to Defend and, later, brought a motion before the court seeking to stay the landlord’s action on the basis of the arbitration provisions contained in the parties’ lease.

The tenant’s motion was grounded in s. 7(1) of the Arbitration Act, 1991. Under the provision, if a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced must stay the proceeding on the motion of one of the other parties to the arbitration agreement.

Court Sets Out Framework for Granting Stay of Court Action in Favour of Arbitration

The court began by noting the mandatory nature of s. 7(1) of the Arbitration Act and the statutory presumption in favour of arbitration over litigation. However, the court also stated that under s. 7(2), the court may refuse to stay the proceedings in certain circumstances, including where the court determines that “the matter is a proper one for… summary judgment”, as was argued by the landlord.

The court then set out the five questions to consider in determining whether to grant a stay under s. 7(1), as established by the Ontario Court of Appeal in Haas v. Gunasekaram:

(1)  Is there an arbitration agreement?

(2)  What is the subject matter of the dispute?

(3)  What is the scope of the arbitration agreement?

(4)  Does the dispute arguably fall within the scope of the arbitration agreement?

(5)  Are there grounds on which the court should refuse to stay the action?

Court Analyzes Each Factor of Framework for Stay of Litigation

On the first question, the court determined that the arbitration provisions in the parties’ lease constituted an arbitration agreement.

On the second question, the court found that the subject matter of the dispute related to the rent and other amounts owed to the landlord by the tenant under the lease.

On the third question, the court noted that the scope of the parties’ arbitration agreement as stated in the lease provision extended to “any dispute between the parties…which touches upon the validity, construction, meaning, performance or effect of [the lease] or the rights and liabilities of the parties hereto or any matter arising out of or connected with [the lease]…” 

Fourth, the court held that the dispute clearly fell within the scope of the arbitration agreement. 

Having found that the first four criteria had been met, the court then set out to determine whether the fifth factor applied in light of the landlord’s argument that the matter was proper for summary judgment under the Arbitration Act.

Court Refuses to Stay Action in Favour of Arbitration

First, relying on the threshold for summary judgment in r. 20 of the Rules of Civil Procedure and the Supreme Court of Canada’s decision in Hryniak v. Mauldin, the court stated that litigation may only be allowed to proceed in the face of an arbitration clause where the case is a proper one for summary judgment because there are no genuine issues requiring a trial.

The court proceeded to review the tenant’s Notice of Arbitration. It noted that the notice raised two main issues: 1) the arrears of additional rent, and 2) mitigation.

With respect to the arrears of additional rent, noting that the tenant had not raised any issues with respect to the accuracy of the accounting or contract interpretation, the court concluded that the matter did not require a trial and could properly be resolved on a summary judgment motion.

Turning to the issue of mitigation, the court noted that the tenant’s argument had not been particularized. The court further acknowledged the landlord’s argument that, under the circumstances, it had no duty to mitigate. The court then stated:

“I wondered whether the tenant’s mitigation argument relates to its assertion that the landlord failed to assist it to obtain COVID-19 relief through government programs, but it has not alleged mitigation in connection with the facts it asserts about the landlord’s failure to provide it with a letter that it was in good standing. In any event, the record also indicates that the landlord had earlier assisted the tenant with its application for COVID -19 relief, and also that the tenant was not in good standing in January 2021, and had failed to furnish the agreed-upon rent cheques for January to June 2021. I am not satisfied that this factual issue raises a genuine issue requiring a trial, if the tenant even intended to rely on it for that purpose.”

As such, the court ruled that mitigation was not a genuine issue requiring a trial.

In the result, the court, therefore, exercised its discretion to dismiss the tenant’s motion to stay the litigation, holding that the case was a proper one for summary judgment before the court.

Finally, the court observed:

“Although not determinative of my decision, I also note that the arbitration provision in the lease is onerous, in that it requires three arbitrators, which seems an unnecessary and disproportionate expense for the parties in the context of this dispute. This factor lends support to my conclusion that arbitration is an impractical alternative in the circumstances.”

Contact Baker & Company for Experienced Advice on Commercial Leasing Matters

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

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Real Estate Law Residential Real Estate

Father and Daughter Sue Each Other Over Failed Transfer of Family Home

In a recent Ontario decision, the court had to determine whether a daughter and her father had entered into a valid oral agreement over the transfer of the family home.

Father and Daughter Agree to Transfer Family Home

The father owned the family home in Mississauga, Ontario, which he no longer lived in.

Instead, at the time, the daughter, her partner and their two children lived in the home.

The daughter and her partner entered into an oral agreement to purchase the family home from the father. There was no written agreement.

Father Refuses to Transfer Home to Daughter

The transfer deal was originally set to close on August 31, 2016.

In April 2017, however, the father refused to close the sale of the home to the daughter and her partner. Instead, he demanded more money. When that demand was not met, he demanded that the couple and their children vacate the home so he could sell it on the open market.

The couple claimed that the father had agreed to extend the closing to May 31, 2017, which the father denied.

Daughter Sues Father for Specific Performance or Damages

As a result of the father’s refusal to sell them the home, the couple sued him for specific performance or, alternately, for damages for breach of contract, punitive and exemplary damages of $100,000,  special damages of approximately $166,000 comprising the amount they spent to renovate the home and the partner’s lost profit and opportunities in his business which he suffered when he, as a contractor, did the renovations to the house. In response, the father counterclaimed for rent to be set by the court.

Recognition of Oral Agreements

The court began by setting out the four criteria to consider in determining whether an oral contract exists: 

  1.  It is necessary to distill from the words and actions of the parties, at the time the contract was entered into, what they intended; 
  2. Evidence of the parties’ subjective intentions has no independent place in determining the terms of their bargain; 
  3. The test of what the parties agreed to requires an objective determination; and 
  4. The contract must include the requisite elements of offer, acceptance and consideration.

The court explained that, essentially, the question is whether there was a meeting of the minds, which must be determined objectively by asking: would an objective, reasonable bystander conclude that, in all the circumstances, the parties intended to contract? 

The court further noted that an intention to contract alone is not sufficient to create an enforceable agreement as the essential terms of the agreement must also be sufficiently certain.

Additionally, the court discussed the role of art performance or continued negotiations in creating an enforceable agreement.

Finally, the court explained:

“Negotiations, however advanced, do not constitute an enforceable agreement where (1) there is uncertainty as to essential terms, (2) the provisions of what was agreed to are insufficiently certain, and (3) it is the intention that a binding agreement should not arise until a formal document has been executed.”

Court Rules That There Was No Valid Agreement

Ultimately, the court found that there had been no valid agreement to transfer the home. While the court noted that the parties had agreed to certain terms of the contract, such as the transfer date, expenses, and certain renovations, it ruled that they had failed to agree to one fundamental term: the price.

As such, the court held that, while the parties had discussed a price, they had never agreed to a certain amount. Therefore, the court found that there was no valid agreement. It further found that there had been no agreement to extend the closing date.

In the result, the court, therefore, dismissed the couple’s claim for specific performance. However, the court did award the couple damages for the costs of renovations completed in the amount of $163,000.

The court also declared the father the owner of the home and stated that he was free to market and sell the home.

Finally, while the court rejected the father’s counterclaim for past rent, it stated that the couple was entitled to remain in the home until it was sold and had to pay rent, the total of which could not fall below $1,800.00.

Contact Baker & Company for Experienced Advice on Real Estate Matters

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

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Real Estate Law Residential Real Estate

Toronto Islands Trust Tries to Block Home Transfer to Adult Adoptee

In an unusual Ontario decision, the court was faced with a case in which a homeowner had purported to transfer a half-interest of his Toronto Islands home to an adult adoptee.

90-Year-Old Adopts 58-Year-Old

In 2017, the owner of a home in the Toronto Islands legally adopted an adult man.

At the time, the owner was 90 years old and the adoptee was 58 years old.

The homeowner had known the adoptee for approximately 37 years and had acted as a father figure to him during that time.

In 2018, following the adoption, the homeowner transferred a half-interest in his home to the adoptee.

Toronto Islands Home Transfer Rules

Toronto Islands homeowners are subject to the rules set out in the Toronto Islands Residential Community Stewardship Act (the “Islands Act”).

The Toronto Islands, situated in Lake Ontario, include a residential community of 262 homes. 

The Islands Act sets out a regime under which transfers of homes on the island are subject to strict regulation which is administered by the Toronto Islands Residential Community Trust Corporation (the “Trust”). 

The Islands Act provides that homes on the island can only be transferred through the Trust to the person first in line on a waiting list maintained by the Trust. Additionally, home prices are fixed by regulation.  
However, there are three exceptions to this regime: under certain conditions, an owner can transfer a home to a spouse, a joint tenant, or a child. “Child” is defined in the Islands Act as including an “adopted child”.  

Trust Challenges Transfer of Land to Adoptee

Initially, the Trust brought up certain deficiencies in the transfer transactions to the attention of the homeowner and the adoptee. It claimed that the transfers were invalid. 

In response, the purported transfers were unwound.  

However, even after the transfers were unwound, the Trust brought an application for declaratory relief to the court. 

The Trust was concerned about rumours among Island residents that adult adoptions were one way of avoiding at least some of the restrictions on transfers of Island homes.  

As such, among other relief, the Trust sought:

  • A declaration that the adult adoption of the adoptee by the homeowner bestowed no legal right to the adoptee to obtain title to the home;
  • Fines of $5,000 against the homeowner and the adoptee for their improper transfers of interest in the home.

The Trust asked the court to take a purposive approach to the interpretation of the Islands Act in order to prohibit the proposed transfer and to prohibit general transfers between a homeowner and an adopted adult child. The Trust submitted that allowing transfers of homes to adult adoptees would subvert the transfer restrictions under the legislation and would violate the interests of the 500 members of the purchaser’s list.

Court Considers Context of Adoption

The court began its analysis by reviewing the relationship between the homeowner and the adoptee. It also surveyed the law surrounding adoption as set out in the Child, Youth and Family Services Act.

Ultimately, considering the circumstances, the court held that the adoption appeared to be genuine, stating: 

“The [homeowner] has acted as a father figure to the [adoptee] for approximately 37 years. This is not a case of two adults with little or no prior relationship engineering an adoption to defeat the purpose of transfer restrictions on Island homes. This is an example of a genuine family relationship that stretches back decades and that is amply supported by contemporaneous documentation over the course of 37 years. In those circumstances, there is no reason to place any limitation on the definition of a child as including an adopted child under the Islands Act.”

The court, therefore, refused to order the relief sought by the Trust, stating:

“Given the depth of evidence of a long-standing familial relationship between [the homeowner] and [the adoptee], I am inclined to apply the words of the Islands Act, literally and find that [the adoptee] is a child of [the homeowner] for purposes of that Act.  It is highly unlikely that two other adults would engage in a 37-year relationship involving their immediate and extended family to engineer a transfer of an Island home to circumvent the restrictions contained in the Act.” 

Additionally, the court refused to impose a fine on either the homeowner or the adoptee, finding that the circumstances were not appropriate for such an order.

Contact Baker & Company For Experienced Advice on Real Estate Matters

Purchasing or leasing a property can often be the single largest expense for an individual or a business. With the amount of money involved and the fluctuating state of the real estate market, it is not surprising that every purchase and sale or lease comes with inherent legal and financial risk.

The real estate lawyers at Baker & Company have been guiding buyers, sellers, landlords, and tenants through various aspects of real estate transactions for many years. We have seen the market at its best and at its worst and have provided reliable, pragmatic legal advice and risk management at every stage.

Whether you are buying or selling your home, cottage, investment property, or vacant land, we can assist you from the beginning to the end of the transaction.

We are both everyday trusted advisors and problem solvers. As advisors, we steer our clients through issues and questions that may arise on a day-to-day basis. We provide proactive guidance and advice intended to address matters before they escalate into major issues. As problem solvers, we respond quickly and efficiently where a serious concern presents itself and where legal intervention is required.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

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Commercial Leases

Court Rejects Commercial Tenant’s Force Majeure Defence for Unpaid Rent During COVID-19 Pandemic

We have been closely following Canadian cases in which commercial tenants have attempted to get out of their commercial leasing obligations due to the COVID-19 pandemic and the related shutdowns, in many cases citing force majeure clauses. 

More recently, the Quebec Court of Appeal examined a case in which the tenant invoked a force majeure defence in the landlord’s claim for unpaid rent during the pandemic.

Commercial Tenant Stops Paying Rent During COVID-19 Pandemic

The commercial tenant rented space from the landlord in Montreal at $39,600 per month pursuant to a ten-year lease. 

During the COVID-19 pandemic, and with the cooperation of the landlord, the tenant benefited from the Canada Emergency Commercial Rent Assistance (“CECRA”) program from April 1, 2020 to September 30, 2020 and paid a reduced rent during this period.

However, as of October 2020, when it ceased benefiting from the CECRA program, the tenant stopped paying rent to the landlord. 

Tenant Blames Pandemic for Unpaid Rent and Invokes Force Majeure Defence

The landlord took the tenant to court.

In response, the tenant claimed that the COVID-19 pandemic justified its failure to pay rent and invoked the force majeure defence.

On the date of the hearing, the total arrears was $277,201, representing seven months of past rent, charges and taxes.

At the outset, the Superior Court stated:

“During a global pandemic, should a commercial tenant be ordered to pay rent while the parties wait for a trial on the merits? This is the question the Court must answer.

As is so often the case, the answer is: It depends.

It depends on the facts and the particular circumstances of the case. Whether the tenant is occupying the premises and how the premises are being used are important considerations.”

Lower Court Rejects Tenant’s Claim of Force Majeure

In response to the tenant’s claim regarding the COVID-19 pandemic, the court stated that the sole existence of the pandemic did not excuse the tenant from its obligation to pay rent. The court explained that, while the Civil Code of Quebec may entitle a person to be freed from their legal obligations where there is proof of a superior force (or “force majeure”), the tenant’s situation did not meet the relevant criteria. The court further explained that a force majeure defence requires proof of both an unforeseeable and irresistible event. 

While the court accepted that the COVID-19 global pandemic was unforeseeable, it did not find that the pandemic met the criterion of an “irresistible” event, stating:

“For [the tenant’s] COVID defense to work, at the very least, it must prove that, as a result of the pandemic, there is nothing it can do to pay its rent because, no matter what it does, it cannot operate a business center on the premises and generate revenue.

[The tenant] has made no such proof.”

While the court acknowledged that the tenant had offered evidence of a decrease in its revenues due to the pandemic, it stated that such a decrease was not enough to free the tenant of its legal obligations following the doctrine of superior force.

As a result, the court issued a safeguard order compelling the tenant to pay the landlord $79,200 for the rent of April and May 2021 within 10 days and to further pay the landlord $39,600 in rent on the first of every month, beginning on June 1, 2021 and for a period of six months up to and including the rent for November 2021.

The tenant applied for leave to appeal to the Quebec Court of Appeal.

Court of Appeal Refuses to Hear Tenant’s Appeal

On appeal, the tenant claimed that the lower court had erred in law by ruling that the COVID-19 global pandemic was unforeseeable, but that the tenant had not satisfied the irresistibility requirement in its force majeure defence. The tenant further claimed that the lower court had made palpable and overriding errors by not giving proper weight to its loss of revenues. 

However, the Court of Appeal held that the lower court had applied the correct legal test and conducted a careful analysis of the circumstances. It therefore dismissed the tenant’s application for leave to appeal.

Contact Baker & Company for Experienced Advice on Commercial Leasing Matters

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

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Residential Real Estate

Real Estate Agent Awarded Commission Based on Unjust Enrichment Despite Lack of Written Agreement

In a recent Ontario decision, buyers in a real estate deal were ordered to pay a real estate agent commission for the purchase of a property based on unjust enrichment, despite the fact that the parties had never signed a Buyers Representation Agreement (“BRA”).

In the real estate business, relationships between purchasers and real estate agents are almost always governed by a BRA. A BRA contains a series of standard form terms, including a term that the purchasers will not use the services of any other real estate agent in the time that the BRA is in effect. The time period that a BRA is in effect can be negotiated by the parties.

Couples Look For New Home

The appellants in the case were two brothers and their wives.

The respondents were a real estate brokerage firm and one of its employees, a real estate agent. 

In 2015, the appellants were looking for a house with some acreage that would allow both families to live in the same house. As a result, there were some unique features to the property that they were looking for, such as two kitchens.

One of the brothers met the real estate agent and, after discussion, the real estate agent began researching properties that would meet the unique needs of the appellants. He was able to find several properties for the appellants to consider, including one called the Gore Road property.

The parties did not sign a BRA or any other type of agreement. While a BRA was prepared, it was never signed.

Parties Part Ways 

Over several months in 2014, the appellants made a series of offers on the Gore Road property through the real estate agent, but none were accepted. Following the failed offers, the appellants told the real estate agent that they were going to stop pursuing the purchase of a new home or selling their current home until the following spring.

However, the Gore Road property came back on the market in early 2015. In February of 2015, one of the husbands signed a BRA with the listing agent for that property and made an offer to purchase the property, which was accepted.Thus, title to the property was taken in the name of all four appellants and commission was paid to the sellers’ real estate agent.  

Real Estate Agent Sues Appellants for Unjust Enrichment

Later that year, the real estate agent discovered that the home owned by one of the brothers had been sold and that the appellants had purchased the Gore Road property. As a result, the respondents pursued an action against the appellants.

At trial, the Deputy Judge rejected the evidence of the purchasers that they had ended the relationship with the real estate agent because they were unhappy with him.

Instead, the Deputy Judge inferred that the buyers had paid less than full commission to the sellers’ agent and that the reason the appellants went directly to the sellers’ agent was to cut out the real estate agent from the transaction and save on his commission.

Based on that finding, the Deputy Judge determined that the appellants had been unjustly enriched. She concluded that the amount of the unjust enrichment should be calculated based on the usual commission that the real estate agent would have received had the transaction been completed. The commission was fixed at $24,478, which was 2.5% of the price of the home plus HST.

The appellants appealed the decision. 

Court Rules Upholds Finding of Unjust Enrichment

On appeal, the court began by setting out thetest for determining the existence of an unjust enrichment, which requires:

a)       An enrichment of the defendant;

b)       A corresponding deprivation of the plaintiff;

c)        An absence of a juristic reason for the enrichment.

After reviewing the facts of the case, the court concluded:

“It was open to the Deputy Judge to conclude, from the evidence that she had, that the Appellants were able to purchase the Gore Road property for a lower price because the commissions would not be payable to the Respondents. The ability to purchase the property for a lower price is an enrichment. […]

Having determined that the Appellants were enriched by being able to purchase the house at a lower price because they did not have to pay the Respondents’ commissions, it follows that the Respondents suffered a corresponding deprivation of the commissions that they did not receive.”

In the result, the court therefore dismissed the appeal.

Get Advice

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

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Residential Real Estate

Ontario Court of Appeal Upholds $1,326,000 Damages Award Against Landlord After Tenant Dies in Fire

In a recent Ontario Court of Appeal decision, an award of $1,326,000 to the parents of a deceased tenant was upheld following a finding in negligence against the landlord.

Landlord Found Liable After Tenant Dies in Fire 

A residential tenant died from severe injuries following a fire in her basement apartment in 2013. The tenant had been asleep in a bedroom of the rooming house when the fire broke out. However, the tenant had no way of escaping because the windows were barred, and the only exit to the apartment was engulfed in flames and smoke. The interior access stairway connecting the basement apartment to the main rooming house was blocked off, thereby leaving only one potential exit and entry point to the basement apartment. As such, the tenant had to wait until the firefighters arrived on scene. 

The tenant was transported to the hospital but passed away as a result of her injuries. 

Subsequently, the tenant’s parents commenced an action against the landlord and his company for negligent conduct leading to the death of their daughter. 

Jury Finds Against Landlord

Following a trial, the jury found that the landlord and his company had fallen below the standard of care of a reasonable landlord and found them responsible for the tenant’s death. 

The jury made the following damages awards:

1. Loss of care, guidance, and companionship: $250,000 to each parent;

2. Mental distress: $250,000 to each parent;

3. Future costs of care for the father: $174,800; and

4. Future costs of care for the mother: $151,200.

As such, the landlord and his company were held liable for a total of $1,326,000.

The landlord appealed the Ontario Court of Appeal, alleging that the jury had been improperly selected, that the action was precluded under the Fire Protection and Prevention Act, 1997, that the jury’s verdict was unreasonable and that the damages were too high.

Ontario Court of Appeal Dismisses Landlord’s Appeal

After reviewing the landlord’s argument, the Court of Appeal dismissed his first three grounds of appeal.

Turning to the amount of damages, the court began by looking at the damages awarded for the parents’ mental distress. It stated:

“The quantum of damages reflected compensation for psychological injuries sustained by the [parents], not only because their daughter had died but also because she died in horrific circumstances witnessed by the [parents]. Ultimately, the [parents] had to make the difficult decision to remove [the daughter] from life support.

Also, there was clear, expert evidence supporting both [parents]’ claims involving the mental distress they suffered as a result of their daughter’s death. Notably, according to the psychological assessments of the [parents], following the death of [the daughter], the [mother] has “suffered a marked deterioration in her mood and daily functionality … and has also experienced passive suicidal ideation with previous serious contemplation of ending her own life”, while the [father] “is now experiencing exacerbated PTSD symptoms with persecutory anxiety”. The [parents] also testified in exquisitely painful detail at trial about what they saw, what they experienced, and how they had been impacted by the death of [the daughter]. Based upon all of that evidence, there is no basis to interfere with the award of $250,000 in mental distress damages to each respondent.”

The court further rejected the landlord’s objection to the damages for future costs of care, finding that the awards had been predicated on expert evidence and there were no grounds to interfere with the amounts awarded.

Finally, the court reviewed the jury’s award for loss of care, guidance, and companionship. The landlord relied on previous Court of Appeal case law that had established that $100,000 represented the “high end of an accepted range of guidance, care and companionship damages.” Therefore, according to the landlord, the $250,000 awarded to each parent went against the court’s own established case law.

However, noting that the courts have recognized a case-by-case approach to the quantification of damages for loss of guidance, care, and companionship, the court ultimately concluded: 

“[This] will necessarily result in damages awards that will fluctuate. Coming back to the standard of review on appeal, it is only where the quantum of damages set by the jury “shocks the conscience of the court” or is “so inordinately high” that it is “wholly erroneous” that appellate intervention will be appropriate….

Therefore, while there is no question that the jury award for loss of care, guidance, and companionship in this case is high, in light of the factual backdrop of this case, it does not constitute an amount that “shocks the conscience of the court”… Nor does it represent an amount that is “so inordinately high” that it is “wholly erroneous” in nature.”

The court therefore rejected the landlord’s final ground of appeal.

As a result, the landlord’s appeal was dismissed.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Commercial Leases

BC Court Awards HBC Relief From Forfeiture Due to COVID-19 Pandemic in Commercial Rent Dispute

We have been closely monitoring how courts have been ruling on commercial rent disputes in response to the COVID-19 pandemic, writing about various cases across Canada here, here and here. With the exception of one Quebec case, courts have so far been rejecting commercial tenants’ attempts to reduce or excuse rent payments during the pandemic.

In the most recent case, a British Columbia court ruled that the tenant, Hudson’s Bay Company (“HBC”), was required to pay rent despite the COVID-19 pandemic. However, the court also granted HBC relief from forfeiture, provided it pay rent as due.

HBC Fails to Pay Rent During Pandemic

The landlord operates a shopping centre in Penticton, British Columbia. HBC has leased retail space for one of its stores in the shopping centre since 1996. The lease had been renewed several times and was set to expire in 2023.

Pursuant to the terms of the Lease, HBC was required to pay annual rent for the year 2020 in the total amount of $936,437. The annual rent was to be paid in 12 monthly installments of $78,036 each. The lease also contained a clause that required rent be paid “without any abatement, set-off or deduction whatsoever except as specifically provided for in this lease”.

Further, the lease contained a clause that set out the landlord’s right to terminate the lease for non-payment of basic rent, provided notice of default was given and the tenant failed to remedy the default within 30 days. Finally, the lease contained a force majeure clause, which excused a party from non-performance of certain lease obligations during a period of “unavoidable delay”, which was defined as follows:

“’Unavoidable Delay’ means any prevention, delay, stoppage or interruption in the performance of any obligation of the parties hereunder due to strike, lockout, labour dispute, act of God, or the occurrence of fire or other casualty, condition or cause which is beyond the reasonable control of the party obligated to perform despite all reasonable efforts of such party to perform (but shall not include any inability to perform because of any lack of funds or any financial condition).”

In March 2020, due to the COVID-19 pandemic, HBC closed its store at the shopping centre and it did not re-open until mid-May 2020. Moreover, beginning in April 2020, HBC ceased paying its monthly rent to the landlord. HBC had requested that the landlord restructure the lease in response to the disruptions caused by the COVID-19 pandemic. The landlord suggested that HBC apply to its tenant relief program, but HBC refused. 

Thus, on April 15, 2020, the landlord delivered a notice of default to HBC and demanded payment of the outstanding rent within 30 days. 

In response, on May 4, 2020, HBC wrote to the landlord advising it would not be paying rent due to the COVID-19 pandemic. 

In the following months, HBC continued to not pay rentand the landlord sent HBC a notice of default each month.  

Then, on September 4, 2020, HBC wrote to the landlord alleging that it was in default of the lease for failing to maintain the shopping centre in accordance with “first class regional shopping centre” standards and by failing to take extraordinary marketing initiatives during the COVID-19 pandemic. HBC requested an abatement of rent.

On November 9, 2020, the landlord issued a notice to quit and notice to terminate the lease agreement. The landlord alleged that HBC had been in wrongful possession of the premises since that date.

In its application to the court, the landlord submitted that pursuant to the terms of the lease agreement, HBC was required to pay the full amount of the agreed upon rent, without abatement or set-off, and that failure to do so entitled it to terminate the lease and retake possession of the rented premises.

In response, HBC submitted that the landlord was in breach of the terms of the lease in that it failed to provide a “high quality” shopping centre. HBC stated that, in the circumstances, the court should exercise its equitable and legal jurisdiction to prevent it from having “to bear the entire economic burden of an unprecedented public health and economic crisis”. HBC further argued that the COVID-19 pandemic amounted to “unavoidable delay” as defined in the lease and that the “unavoidable delay” clause operated to suspend its obligation to pay rent. Finally, it sought relief from forfeiture.

Court Grants HBC Relief from Forfeiture

After reviewing the applicable legal principles and the terms of the parties’ lease, the court first held that HBC was in default of its obligation to pay rent pursuant to the terms of the lease and was not entitled to an abatement or set-off.

However, the court ultimately held that HBC was entitled to relief from forfeiture of its interest in the premises, stating:

“Notwithstanding that HBC deliberately chose to not pay rent, I am satisfied that this is an appropriate case to grant relief from forfeiture. A significant factor leading to this conclusion is that the sum to be forfeited is out of all proportion to the loss suffered. HBC has leased the Premises since 1996, a period of almost 25 years. It undoubtedly has a substantial investment in the Premises. Moreover, the evidence before me is that there are no other premises in the area where the HBC store can be located. Accordingly, if forfeiture is granted, HBC would not only lose its lease and its investment in the Premises, but would not be able to relocate the store. In contrast, the loss suffered by [the landlord] is not large….

A further significant factor in my decision is the Covid-19 pandemic. The pandemic is, as HBC submits, unprecedented and has inflicted devastating economic losses on many, including HBC. It is the pandemic that is the root cause of the current dispute. In the circumstances, the court must attempt to ameliorate the consequences of the pandemic, where it can do so with equity and fairness.”

In the result, the court therefore declared that HBC was entitled to relief from forfeiture on the condition, however, that it pay the landlord all rent arrears, plus interest in accordance with the terms of the lease, and provided it pay ongoing rent to the landlord as provided by the terms of the lease.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Commercial Leases

Ontario Court of Appeal Endorses Decision That Took Judicial Notice of Anti-Black Racism in Commercial Lease Dispute

Earlier this year, we wrote about an Ontario decision in which the court took judicial notice of the landlord’s anti-black racism after the landlord attempted to terminate the tenant’s commercial lease.

Last week, the Ontario Court of Appeal released its decision in the case in which it found no errors with the application judge’s assessment of the evidence and dismissed the landlord’s appeal.

Landlord Tries to Evict Tenant

In 2013, the tenant took assignment of a lease for a commercial unit located in a shopping plaza in Toronto. The tenant was a family business, run by a husband and wife team.

The tenant operated a restaurant and bar, serving what was described as African/Black/Caribbean cultural foods and catering to a primarily, but not exclusively, Black community customer base. 

The lease was for a five-year term, ending July 31, 2017. There were two options to renew for additional five-year periods. The lease provided that written notice of the exercise of the option was to be given by registered mail at least six months prior to the expiry of the lease (i.e., by January 31, 2017).

The tenant had not given written notice of its exercise of the option as required, although it had attempted to contact the landlord on numerous occasions. The landlord kept the tenant as an overholding tenant from August 2, 2017 to May 28, 2020, when it terminated the lease. 

The tenant applied to court, seeking relief from forfeiture pursuant to s. 98 of the Courts of Justice Act.

Lower Court Take Judicial Notice of Landlord’s Anti-Black Racism

Ultimately, the application judge found in favour of the tenant for several reasons, including that the tenant had not breached the lease, had made improvements to the premises, had attempted to contact the landlord numerous times, and had acted in good faith. 

Additionally, the application judge took judicial notice of the landlord’s attitude towards the tenant and its racist undertones. The application judge found that the affidavits of the landlord and its agents were “almost a caricature of racially derogatory themes”. 

While the application judge opined that the landlord’s position may not have been consciously racially motivated, he stated nonetheless:

“While a single adjudication dealing with a discreet conflict between a commercial Landlord and Tenant cannot possibly address society’s many challenges with respect to racial justice, it equally cannot ignore them. At the very least, the societal realities pertaining to Black businesspeople like the Tenants must be factored into the exercise of the Court’s discretion in considering equitable remedies like injunctions and relief from forfeiture.”

The landlord appealed the decision to the Ontario Court of Appeal. Among the issues raised, the landlord took issue with the application judge’s observations with respect to anti-Black racism. 

Ontario Court of Appeal Dismisses Landlord’s Appeal

At the outset, the court held there had been sufficient evidence to support the application judge’s conclusions on the facts and that the landlord had not demonstrated a palpable and overriding error in the application judge’s assessment of the evidence. 

With regard to the application judge’s comments on anti-Black racism, the court stated:

“There was language in the Landlord’s affidavits that suggested its concern to find a tenant that would attract “like minded family-oriented customers” as opposed to a “liquor bar” was stereotypical labelling. The evidence supported the application judge’s conclusion that the real issue for the Landlord was the fact that the “Tenant is a Black-owned and operated business and caters to an Afro-Caribbean community”.

The application judge was entitled to take judicial notice of anti-Black racism in Canada. He found that whether the Landlord’s racial stereotyping was conscious or not, it was a matter he could take account in the exercise of his discretion to grant relief from forfeiture. As he put it…“the societal realities pertaining to Black businesspeople like the Tenants must be factored into the exercise of the Court’s discretion in considering equitable remedies like injunctions and relief from forfeiture.”

Based on all the evidence, including the Tenant’s evidence and the evidence of the Landlord’s own witnesses, the application judge was entitled to conclude that anti-Black racism was relevant to the Landlord’s refusal to negotiate a renewal of the lease, regardless of whether the Landlord’s actions were consciously motivated by racism.”

In the result, the court therefore dismissed the landlord’s appeal.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Real Estate Law

A Failure to Obtain Financing Does Not Excuse Backing Out of a Real Estate Deal

In a recent Ontario case, a purchaser learned that a failure to obtain financing after signing a real estate agreement did not excuse his reneging on the deal. 

Purchaser Refuses to Close Deal

The vendor and buyer entered into an agreement of purchase and sale for a home in the amount of $1,635,121. The purchaser paid deposits of $160,000. 

After both parties initially agreed to extend the closing date, the purchaser subsequently advised the vendor of his intention not to close the transaction on February 7, 2018, stating in an email “I hereby inform you that due to deliberate inflation of the price, we are not closing on Friday.”

The vendor applied to court alleging that the purchaser’s conduct was an anticipatory breach of the agreement. The vendor submitted that the purchaser was obligated to close the transaction on the date scheduled for closing and did not have the right to unilaterally refuse to do so.  

In response, the purchaser relied on the doctrines of frustration, force majeure, impossibility, and impracticality, arguing that the doctrines vitiated the agreement and relieved him of his obligations under it. 

Further, in his counterclaim, the purchaser sought the return of his $160,000 deposit. He relied on a significant decrease in value in real property in the Greater Toronto Area (“GTA”), which he submitted had caused the agreement to become radically different from the one that the parties entered into.

The purchaser submitted that, as a result of the decrease in value in real property in the GTA, he had been unable to secure financing, which had resulted in making the agreement commercially impractical for him to complete. He argued that such unforeseen events had resulted in the obligations under the agreement of being radically different from those contemplated by the parties, resulting in a frustration of the agreement, which relieved him of his obligations.  He emphasized that the drop in the real estate market was outside of his control. Finally, he submitted that the drop in the GTA real estate market had not been anticipated by the parties to the agreements.

Court Rejects Purchaser’s Claims

The court rejected the purchaser’s argument, stating:

“The Purchaser claims for a return of the deposit on the ground that the [agreement] was terminated as a result of the operation of the doctrine of frustration, impossibility, force majeure and impracticality.

The Purchaser’s obligations under the [agreement]did not change, nor did the purpose of the [agreement]. The Purchaser contracted to pay a price for the Property, regardless of whether he could obtain financing. Even if the Purchaser was unable to borrow a sufficient sum of money to close the transaction of purchase and sale, (the Purchaser has not adduced any evidence to support his assertion that he was unable to secure financing), such does not absolve him for his liability pursuant to the [agreement].

The Purchaser did not make financing a condition of his offer to purchase the Property. 

I find that as the Vendor accepted the Purchaser’s anticipatory breach of the [agreement], it resulted in the [agreement]  being at an end.”

The court therefore held that the vendor was entitled to be put in the financial position that it would have been in had the purchaser not breached the agreement. 

As such, in the result, the court ordered the purchaser to pay the vendor $272,967 plus interest, after deducting the deposit amount from the damages.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.