Complete paperwork is important in any legal contract. But the recent Ontario Court of Appeal decision Bennett Law Chambers Professional Corp v. Camcentre Holdings Inc. (2022 ONCA 658) shows what happens when a landlord/developer terminates a lease before it has all of its paperwork in place.
The landlord provided the required 6 months prior notice that it intended to terminate the lease so as to redevelop the building. However, the lease required the landlord to have all necessary permits and authorizations to commence the demolition at the end of the 6-month period, and the landlord had not received a demolition permit from the municipality when the notice period expired.
The landlord argued that the first part of the demolition process—removal of asbestos—could proceed without a permit. The trial judge disagreed, and found that while the asbestos needed to be removed prior to demolishing the building, the actual process of demolition did not occur until the asbestos had been removed. The landlord’s failure to obtain a conditional demolition permit prior to the end of the 6-month notice period resulted in the landlord’s notice of termination being ineffective to terminate the lease, a decision which was upheld on appeal.
The “take-away” is that a party relying on an extraordinary right, such as right to terminate a lease for demolition or redevelopment purposes, needs to be very careful to ensure that the actions taken comply fully with the requirements of the contract. This is particularly important where, as happened here, there were multiple tenants in occupancy, and the clause being relied upon could differ from lease to lease.
For more information about commercial leasing, please contact Peter Anderson.