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COMMERCIAL TENANCIES - Lease - Restrictive covenants

Tuesday, February 07, 2017 @ 10:32 AM  

Appeal by the defendants, TEL Management and its principal, Edmonds-Leckie, from a judgment in favour of TEL's landlord, Corydon Village Mall. The tenant leased retail space in the landlord's shopping mall to operate a women's shoe store. The lease specified use of the premises and provided any change required the landlord's prior approval, with such approval not to be unreasonably withheld or delayed. The lease also listed several prohibited uses. Due to difficulties with inventory, the tenant sought to change its business to include ladies' clothing, accessories, giftware and home accessories for the holiday season. The landlord refused to consent to the proposed change due to other mall tenants having exclusivity clauses in their leases. The tenant stopped paying rent and moved out. The landlord sued for damages arising from the non-payment. The defendants asserted the landlord breached the lease by unreasonably withholding consent to the proposed change. The trial judge interpreted the lease to provide that the covenant not to withhold consent did not apply to a proposed change to one of the prohibited uses. The judge determined that the tenant's proposed change involved a prohibited use. The judge concluded that the landlord did not breach the lease by unreasonably withholding consent, or alternatively, acted reasonably. The landlord was granted judgment on the amounts claimed. The tenant and its principal appealed.

HELD: Appeal dismissed. The trial judge's interpretation of the lease was reviewable on a deferential standard of reasonableness, as this was not a standard form lease with terms unilaterally dictated by the landlord. The trial judge did not err in the interpretation and application of the relevant provisions of the parties' lease. The finding that the proposed change was a prohibited use was unassailable. The trial judge did not err in finding the landlord acted reasonably, and did not unreasonably withhold its consent to the proposed new use on the basis that a prohibited use was an exception to the landlord's consent obligations. There was no error in concluding that the landlord had not breached its obligations under the lease. Other grounds of appeal related to the quantum of damages were disposed of summarily.

Corydon Village Mall Ltd. v. TEL Management Inc., [2017] M.J. No. 8, Manitoba Court of Appeal, B.M. Hamilton, D.M. Cameron and C.J. Mainella JJ.A., January 17, 2017. Digest No. 3637-011