In a recent Ontario decision, a court took judicial notice of the landlord’s anti-black racism in a dispute over a commercial lease.
Landlord Tries to Evict Tenant
In 2013, the tenant took assignment of the lease for a commercial unit located in a shopping plaza in Toronto. The tenant operated a restaurant and bar in the unit. It had spent $150,000 in installing improvements to the premises when it took it over in 2013.
The restaurant and bar are owned and operated by a husband and wife team, served what was described as African/Black/Caribbean cultural foods, was licensed by the LCBO to serve alcoholic beverages, and catered to a primarily, but not exclusively, Black community customer base.
The tenant’s restaurant business was quite successful. Even during the COVID-19 pandemic, the tenant maintained its takeout business and had never missed paying any base rent or additional rent.
Ownership of the plaza changed during the term of the tenant’s lease, with a new landlord acquiring the plaza in 2016.
The original lease was for a 5-year term, from August 1, 2012 to July 31, 2017, with options to extend the term for two additional 5-year periods. The lease’s option to renew clause stated that the cutoff date for the tenant to provide written notice of its desire to exercise the option to renew was January 31, 2017.
While no written notice of exercise of the option was provided by the tenant prior to the cutoff date, the tenant did try on numerous occasions, both before and after the cutoff date of January 31, 2017, to get in touch with the landlord and the manager by phone in order to start the renewal process, but with no success. In fact, it appeared that their calls were deliberately avoided.
After nearly a year of unanswered calls, the tenant had its leasing lawyer write to the manager indicating that it wanted to exercise its option. In his letter, the tenant’s lawyer explained that his clients had been advising the manager by phone message that they wanted to renew the lease, and that all they had gotten in return was a voice message saying “We’re looking into it.”
Then, on May 28, 2020, the landlord delivered a letter to the tenant, stating: “The landlord hereby exercises its right to terminate the lease now deemed a monthly lease”.
In its court filings, the landlord stated that the tenant was not to its liking because it did not attract what he called “like minded family-oriented customers”.
In addition, a contractor who had worked for the landlord in the plaza stated to the court that: “The customers visiting [the tenant’s restaurant] seemed to me to be quite unlike, in a negative way, the usual clientele visiting other tenants…” He went on to say: “the [tenant’s restaurant] does not attract family-oriented customers and detracts from the appeal of the Plaza for families.”
Finally, the landlord argued that if the tenant were to vacate the premises and make way for a new tenant, the landlord’s rental income would increase.
In response, the tenant sought relief from forfeiture and moved to enjoin the landlord from evicting it from the premises.The tenant claimed that the landlord’s real point was that the “wrong” kind of families ate at its particular establishment. It submitted that there was a barely veiled tone of racism in the observations made by and on behalf of the landlord about a Black community restaurant. Additionally, the tenant submitted that the landlord had recently failed to renew leases when they came due of at least one other tenant owned or operated by persons of colour. It was the tenant’s perception that the plaza was gradually being transformed in a racially defined way.
Court Rules in Tenant’s Favour
Citing previous case law, the court began by explaining that the power to relieve from forfeiture is discretionary and fact-specific and is predicated on the existence of circumstances in which enforcing a contractual right of forfeiture, although consistent with the terms of the contract, visits an inequitable consequence on the party that breached the contract. It found that none of the usual factors weighing against a party seeking relief had come into play. The court then stated:
“Since the Tenant was not in breach of the Lease, and no financial loss has been established by the Landlord, there is little to balance on the Landlord’s side of the equation other than the Landlord’s subjective view of what it called an “unattractive” Tenant. […]
More importantly, the prejudice that would allegedly be suffered by the Landlord is not one which carries weight in considering a balance of equities. As already indicated, the Tenant is of the view that it is the fact that the Tenant is a Black-owned and operated business, and caters to an Afro-Caribbean community, that is the real issue for this Landlord. I have already observed that the Landlord’s stereotypical portrayal of the Tenant’s customers’ behaviour fits an established pattern in society. In the Tenant’s view, the only “prejudice” the Landlord will have suffered if the Tenant does not have to forfeit the Premises is that the Tenant and its African Canadian customer base, who, as the Landlord’s affiant said, are “quite unlike, in a negative way” the rest of those at the Plaza, will remain in the Premises. With respect, this is precisely what legal scholars have identified as the “‘Othering’ of minority people…in the guise of legal method.”
Generally speaking, a trier of fact can take judicial notice of facts that are “so notorious or generally accepted as not to be the subject of debate among reasonable persons”. To this I would add the observation that, “The existence of anti-black racism in Canadian society is not the subject of debate among reasonable people”.”
While the court observed that its decision in the matter at hand could not address society’s many challenges with respect to racial justice, it stated that it could equally not ignore them. It stated that, at the very least, the societal realities pertaining to Black businesspeople like the tenant had to be factored into the exercise of the court’s discretion in considering equitable remedies like injunctions and relief from forfeiture.
The court then explained that s. 98 of the Courts of Justice Act provides that a court “may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just” and that the justice considerations entails, among other things, an assessment of the good faith of the parties. Ultimately the court held:
“The equities, as well as the balance of convenience, weigh in the Tenant’s favour. There is, objectively speaking, no prejudice to the Landlord in allowing the Tenant to remain as a rent-paying tenant of the Premises at the present base rent and additional rent, plus any applicable HST. Terminating the Tenant’s tenancy under present circumstances risks giving force to the Landlord’s subjective, if perhaps unconscious prejudices.
On the other hand, if the tenancy were ended now, while the Tenant is in good standing in every respect, the Tenant would suffer irreparable harm. That is, it would lose not only its substantial investment in the Premises, but the goodwill associated with its well-established location. Its owners and customers would also suffer the indignity of being excluded from the Premises based on what can be seen as a form of bias which Ontario law rejects.”
As a result, the court found that the test for injunctive relief had been met and ordered that the tenant’s term under the lease would continue until July 31, 2022, which was the date when its first 5-year extension would have ended. It further ordered that all other terms and conditions of the ongoing tenancy would remain the same as in the lease, including the tenant’s option for a second 5-year renewal.
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.