Tenants are routinely requested by landlords to execute estoppel certificates in favour of purchasers or lenders as to the status of their leases. Most tenants ensure there are no ongoing performance defaults (such as a failure to repair) or monies owing by the landlord (such as for year-end adjustments). How many tenants review their lease carefully before signing?… Continue Reading
Direct agreements or tripartite agreements are often an important feature of financings involving ground leases or single tenants, as well as in project finance. … Continue Reading
As many companies, particularly retailers, seek to monetize assets or at least leverage valuable real estate assets, we are witnessing increased popularity of sale leaseback transactions.… Continue Reading
Operating Costs – they are discussed endlessly during the lease negotiations and then often become the most contentious ongoing issue between landlord and tenant.
The almost universal practice is that at the beginning of each year landlord estimates operating costs and tenant pays in instalments based on that estimate. Shortly after the end of the year the landlord delivers a statement of operating costs for the past year which may be certified or audited depending on the provisions of the lease. … Continue Reading
The Quebec Court of Appeal in Meyerco Enterpresis Ltd. v. Kinmont Canada Inc. (2016 QCCA 89) has recently partially overturned a lower court ruling that awarded damages for a false estoppel signed by a tenant based on application of a cap rate paid by the buyer and addressee of the estoppel instead applying general principals of damages including mitigation.… Continue Reading
Building owners that lease their property using a turnover rent (or “percentage rent”) structure to retailers are facing an important challenge relative to capturing revenue from online sales.
Turnover rent lease arrangements entail a base rent payment to which is added a percentage of a tenant’s sales, or the higher amount between a base rent and a sales percentage. This structure allows landlords and tenants to share in a business’ risks and rewards. In Canada, there is no legislation or formal guidelines regarding the calculation or inclusion of online sales with regards to the computation of a turnover rent structure.… Continue Reading
One of the most difficult and common problems faced by a landlord is a tenant who is unable or unwilling to pay rent. Under s. 104 of the Alberta Civil Enforcement Act, a landlord may seize the personal property of a residential or commercial tenant in order to secure the landlord’s claim for unpaid rent under the lease (although seizure is typically much more effective in a commercial context). This is called the landlord’s “right of distress.”… Continue Reading
In response to various scandals and as part of a continued global anti-corruption effort, the Canadian federal government responded with a new set of rules around integrity in procurement practices as well as sanctions for breach including termination of supply agreements and banishment. … Continue Reading
Until recently, there has been some confusion over the limitation period in respect of rent. This is largely due to the fact that there are two references to the term “rent” in the Real Property Limitations Act (with one section referring to a ten-year limitation period and the other section referring to a six year limitation period), which governs claims for rent. This differs from the Limitations Act which governs damages claims (and has a limitation period of two years).… Continue Reading
There is no one-size-fits-all approach to the scope and level of scrutiny a mortgage lender brings to a lease review. Leases are complex commercial arrangements and lenders invariably face trade-offs between the time and expense of a thorough review and understanding the bundle of rights and obligations that make up a key driver of the value of their collateral. A lender’s lease review will look a lot like a purchaser’s, except that instead of stepping into the landlord’s shoes immediately, it must contend with uncertainty about if and when it will ever have to take over the lease and the … Continue Reading
As a millennial, there are certain phenomena that I am inexplicably drawn to like a moth to a flame, one of which is this utopian vision of an office space, with an open concept design, that promotes collaboration within and between different functional teams and the cross-seeding of ideas (no mom, we do not play ping pong at work). In addition, the ever-evolving digital economy has empowered a burgeoning class of entrepreneurs that are eagerly looking for office spaces in urban centres, with smaller floor plates than what would typically be offered in commercial leases. These dynamics have contributed to … Continue Reading
On May 28, 2015, Newmark Knight Frank Devencore published its Real Estate Market Study for Spring/Summer 2015 and essentially noted that vacancy rates in downtown Montreal’s Class “A” and “B” office buildings continued to increase over the second half of 2014, establishing themselves at 8,6%, up from 8% at the beginning of 2014. Overall, Newmark Knight Frank Devencore has indicated that overall availability rates, which take into consideration the office space that may currently be occupied but is available for lease or sublet, have increased to 16%. … Continue Reading
On a recent hot summer-like day, my neighbours’ pre-school boy, Charlie (pseudonym), sauntered over the front lawn in his pajamas to peek into my garage. Charlie had his gaze fixed on the foosball table, once a crown jewel of my college days and now just collecting dust in a corner. Charlie asked in the sweetest manner “can I play with that”? Normally, this would not be an issue. However, in an attempt to preserve all of Charlie’s limbs until at least adolescence, I replied that he could play only after I had vacated the menacing and precariously-balanced machines surrounding the … Continue Reading
Like the uncertain and seemingly interminable pause after the first dance at senior prom, the Canadian retail landscape is in a state of flux, with the landlords and retailers clasped in each other’s hands anxiously awaiting the next dance. Retailers are contending with new foreign entrants and the bifurcation of consumer preference, especially in the fashion sector, towards luxury retail and value retail, leaving mid-market retailers lonely hearts in the cold dark night. … Continue Reading
On December 30, 2013, we wrote about the BC Supreme Court’s decision in Delane Industry Co. Ltd. v. PCI Properties Corp., 2013 BCSC 1397, where the Court held that a landlord’s termination of a commercial lease was ineffective because the landlord, having issued a demand letter while the distress process was underway, subsequently purported to terminate the lease after the distress failed to yield sufficient proceeds to cover the rent in arrears. To validly terminate the lease following distress, the landlord needed to issue a fresh demand letter (specifying the amount of rent still in arrears) and allow the … Continue Reading
In a topsy-turvy world, the relative strength and stability of Canada’s economy continues to attract foreign investment, including our commercial and residential real estate sectors.
Since it may not always be advantageous for foreign companies to incorporate a Canadian entity, Canadian businesses are more likely today than ever to have dealings with non-resident companies, whether as buyers, sellers, landlords, tenants or financiers.
Transacting with a foreign company raises a host of issues that need to be thought about. To illustrate just one, consider a situation where a Canadian landlord wants to enforce a covenant in a lease – say a … Continue Reading
Landlords that exercise the remedy of distress rarely recover sufficient funds to satisfy the arrears of rent owing by the tenant. A recent decision of the BC Supreme Court held that, in such a case, a landlord cannot immediately terminate the lease without first giving the tenant any required written notice of default and allowing the applicable cure period to expire.
In Delane Industry Co. Ltd. v. PCI Properties Corp., 2013 BCSC 1397, the tenant fell into arrears and, after giving a written demand letter specifying the amount owing and providing a five day cure period as required by … Continue Reading
Landlords and tenants beware! If you are a landlord and you do not pay enough attention to the tax recharge provisions in your leases, you can end up out of pocket tens or even hundreds of thousands of dollars on the annual tax recharge balance sheet. As we all know, if you do not have a contractual ability to collect, you still have to pay.
Yes, sadly, for all involved, property taxes will always be a part of our reality. Similarly, if the devilish little details are not adequately addressed, a tenant can be surprised by receiving a bill for … Continue Reading
Property rights are “sacrosanct” in Canada… or at least that is what courts tell us. The practical reality is somewhat different. This was highlighted a recent incident in Calgary where a landlord had her home declared an “embassy” by a tenant who refused to vacate. The situation made headlines across the country. The incident brought attention to the rise of freemen-on-land, a group whose legal tactics are summarized in Meads v. Meads, 2012 ABQB 571. However, the incident was also emblematic of a problem that can arise for any commercial landlord or property owner in Canada: how to … Continue Reading
Landlords hold their management fees dear, and need to ensure they are fully recoverable. Offers to lease routinely provide that the tenant will pay a management fee equal to a fixed percentage (say 5%) of the “Basic Rent” payable by the tenant. Despite this clear contractual arrangement, landlords occasionally (and inadvertently) shortchange themselves when preparing the final form of lease.
Consider an offer to lease for a multi-tenant building. The offer says that the lease will be a “net” lease and that the tenant will pay its “Proportionate Share” of “Operating Costs”. The offer also says that the tenant will … Continue Reading
No landlord wants to be sued. That said, lawsuits happen. Having acted for both commercial landlords and tenants, I have observed that several themes prevail when relationships go sour. The areas of disagreement can arise at the outset (e.g., how can you screen prospective tenants) and continue to the end of the relationship (e.g., what can you really do with the security deposit).
A general guideline for landlords as is follows: Just because the lease is not titled a “contract”, it is one. The lease is the document that governs the relationship between the parties, providing significant economic value to … Continue Reading