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COMMERCIAL TENANCIES - Lease - Landlord’s obligations - Repair

Thursday, June 24, 2021 @ 1:00 PM  

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Appeal by the landlord from a decision finding that the amendment of the lease period was ambiguous and that the lease expired in 2039 at the latest as argued by the tenant. Cross-appeal by the tenant from the determination that the landlord had no duty to replace the roof. The tenant operated a grocery store on the leased premises. The initial lease expired in 2004. The tenant also had five successive renewal periods of five years each. In 1999, the parties amended the lease to extend it to 2014. The amendment gave the tenant the option to extend the term of the lease for three additional periods of five years each for a total of five options or 25 years. The landlord then sought a declaration that the maximum term of the lease was 50 years, expiring at the latest in 2029. The tenant argued that the lease extended until 2039 at the latest. The tenant also argued that under the lease, the landlord had an obligation to replace the roof, while the tenant only had an obligation to repair the roof. The landlord argued that the roof, whether it required repair or replacement, was the tenant’s responsibility. The application judge found that the extrinsic evidence, including the notice of lease registered on title and an estoppel certificate, both of which stated that the lease could be extended to 2039, supported the tenant’s position that the amendment extended the maximum length of the lease by 10 years. The application judge determined the landlord had no duty to replace the roof, concluding that the tenant’s obligation to maintain and repair the leased premises under the lease included the roof. The application judge did not think that there was any legitimate basis to distinguish that clause because it said “repair” rather than “replace”.

HELD: Appeal allowed. Cross-appeal dismissed. The application judge erred by failing to consider the wording of the amending provisions in the context of the agreement as a whole. When the 1999 amendment was read within the context of the original lease, there was no ambiguity. The application judge’s interpretation would have rendered the overall term of the lease to be 60 years rather than 50, which was specifically precluded by the original lease. The parties did not amend the 50-year limit provision, even though it was in the same section of the original lease addressing the initial term and renewal options. This interpretation was supported by the factual matrix at the time of the 1999 amendment when the tenant was expanding its store significantly and the landlord contributed to the expansion. It was therefore in the landlord’s interest to secure an early extension of the lease by 10 years to 2014. The application judge correctly concluded that the landlord did not have any duty to replace the roof and that the tenant had the obligation to maintain and repair the roof. The roof repair was a replacement rather than a repair. Given the evidence that the proposed roof overlay would last 15-20 years, and the fact that the lease would end in 2029, it seemed likely that the tenant would receive the bulk of the benefit of the roof overlay.

Orillia (City) v. Metro Ontario Real Estate Ltd., [2021] O.J. No. 2458, Ontario Court of Appeal, K.N. Feldman, J.M. Simmons and A.L. Harvison Young JJ.A., May 6, 2021. Digest No. TLD-June212021008