Barber Greene Business Park Inc. v. L & R Fitness Enterprises Ltd.

 

Barber Greene Business Park Inc., Applicant and L & R Fitness Enterprises

Limited, Respondent

 

Ontario Court of Justice, General Division

 

Chapnik J.

 

Heard: December 1, 1997

Judgment: December 9, 1997

Docket: 97-CV-127472

 

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Counsel: Larry Keown, for the Applicant.

 

 Martin Banach, for the Respondent.

 

 

Subject: Property

 

Landlord and tenant — Renewal of Lease — Option to renew — Notice of renewal

 

Parties applied for determination of their rights under lease contract — Exercise of option to renew requires strict compliance with its terms and conditions — Tenant purported to give notice of renewal by letter from real estate agent — Letter proposed renewal on different terms than contained in lease — Letter was also not explicit exercise of option — Tenant was attempting to negotiate new lease — Landlord was not estopped from relying on strict wording of renewal provisions — Landlord did not waive its rights merely by meeting with tenant during renewal period to discuss lease provisions — Tenant failed to renew lease.

 

Cases considered by Chapnik J.:

 

Becker Milk Co. v. Goldy, 20 O.R. (2d) 400, 87 D.L.R. (3d) 608n (Ont. C.A.) — distinguished

 

 Becker Milk Co. v. Goldy (1977), 18 O.R. (2d) 417, 82 D.L.R. (3d) 598 (Ont. H.C.) — distinguished

 

 

Dragon City Developments Inc. v. Wong (1996), 7 O.T.C. 172, 3 R.P.R. (3d) 157 (Ont. Gen. Div.) — referred to

 

Hughes v. Metropolitan Railway (1877), 2 App. Cas. 439 (U.K. H.L.) — referred to

 

Petridis v. Shabinsky (1982), 35 O.R. (2d) 215, 22 R.P.R. 297, 132 D.L.R. (3d) 430 (Ont. H.C.) — distinguished

 

Ross v. T. Eaton Co. (1992), 27 R.P.R. (2d) 33, (sub nom. Ross v. Eaton (T.) Co.) 58 O.A.C. 366, 11 O.R. (3d) 115, 96 D.L.R. (4th) 631 (Ont. C.A.) — referred to

 

W.J. Alan & Co. v. El Nasr Export & Import Co., [1972] 2 Q.B. 189, [1972] 2 All E.R. 127, [1972] 1 Lloyd’s Rep. 313 (Eng. C.A.) — considered

 

Zacharopoulos v. Sykiotis Enterprises Ltd., [1992] 2 W.W.R. 521, 76 Man. R. (2d) 272, 10 W.A.C. 272, 89 D.L.R. (4th) 57, 22 R.P.R. (2d) 137 (Man. C.A.) — applied

 

120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd. (November 25, 1993), CA C8689, C10457 (Ont. C.A.) — applied

 

6781427 Holdings Ltd. v. Alma Mater Society of University of British Columbia (1987), 36 D.L.R. (4th) 753 (B.C. S.C.) — referred to

 

6781427 Holdings Ltd. v. Alma Mater Society of University of British Columbia (1987), 44 D.L.R. (4th) 257 (B.C. C.A.) — referred to

 

Rules considered:

 

Rules of Civil Procedure, R.R.O. 1990, Reg. 194

 

R. 14.05(3)(d) — pursuant to

 

APPLICATION by landlord for declaration that lease was terminated; CROSS-APPLICATION by tenant for declaration that lease was renewed.

 

 Endorsement. Chapnik J.:

 

 

1     The respondent/tenant operates a health club and fitness centre of approximately 24,000 square feet, located on two floors at premises municipally known as 900 Don Mills Road, North York (the premises). This matter was brought by application under Rule 14.05(3)(d) for the determination of rights under the lease contract.

 

2     The initial lease had been assigned to the tenant on January 2, 1989. The lease stipulated a term of 10 years, commencing April 1, 1987 and expiring on March 30, 1997. It also provided two successive but independent renewal periods of five years each on the same terms and covenants as contained in the lease “except for any further right of renewal or extension beyond the second renewal period and except for the minimum rent payable by the Tenant.” The option to renew contained the proviso that the tenant not be in default in the payment of rent and other sums to be paid under the lease or in the performance of the terms, covenants and conditions contained therein. Pursuant to paragraph 3(b) of the lease, the tenant was to provide written notice to the landlord of an intention to exercise the renewal option between April 1, 1996 and October 1, 1996.

 

 3     On September 17, 1996, R.E. Barrett, president of Windward Realty Inc. (Windward) wrote to the landlord to express the tenant’s interest “in entering into a new 10 year commitment” with the landlord effective April 1, 1997, in space reduced from 24,000 to 20,000 square feet. The letter ends by stating that Windward was given a mandate to represent the tenant “in all negotiations pertaining to a new lease with you and all other landlords who may wish to present lease proposals for our consideration”; and a request for real estate commission “upon occupancy of the new or existing premises on April 1, 1997”. That letter represents the only written correspondence between the parties within the stipulated time frame.

 

 

4     The tenant relies upon the letter as a purported exercise of the option to renew provided in the lease. It is in the landlord’s position that the letter of September 17, 1996 was insufficient to constitute notice pursuant to the renewal option within the meaning of section 3(b) of the lease.

 

5     An option to renew is a privilege, a right which has always been treated by the law as requiring complete compliance with the terms and conditions on which the option is to be exercised. Dragon City Developments Inc. v. Wong (1996), 3 R.P.R. (3d) 157 (Ont. Gen. Div.).

 

 6     The renewal of an option requires explicit certainty and direct, unequivocable communication to the optionor. Notice in law means explicit, express and unequivocable notice. 120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd. (November 25, 1993), Doc. CA C8689, C10457 (Ont. C.A.)

 

 

7     The letter from Mr. Barrett is equivocal in several respects: first, it refers to a 10 year rather than a 5 year commitment; second, it contemplates less rental space than previously; third, it indicates that the respondent was open to receiving lease proposals from other landlords; forth, it makes mention of “a new lease”; and fifth, it makes no mention of exercising the option.

 

8     In a subsequent letter dated November 16, 1996 to the landlord, the tenant made a proposal for a “new lease” incorporating different terms and conditions than the original one including altered square footage, rent free periods, reconfigurations of space and landlord’s covenants, and an extended term. Again, nowhere does the term “option to renew” appear. On the contrary, the tenant appears to be negotiating terms for a “new lease”. It is apparent that the purported exercise of the renewal clause was not certain, direct or unequivocal. A landlord is not required to renew a lease on terms other than those provided for in the renewal clause of the lease. Zacharopoulos v. Sykiotis Enterprises Ltd. (1992), 22 R.P.R. (2d) 137 (Man. C.A.). In all of the circumstances, I find that the tenant never properly exercised its right of renewal under the lease agreement.

 

9     Nevertheless, the tenant contends that the landlord is estopped from relying upon the strict wording in the renewal provisions in the lease; or in the alternative, the landlord waived its right to insist upon strict compliance with those terms, as a result of its ongoing negotiations with the tenant commencing in early September 1996.

 

10     The court has jurisdiction to grant equitable relief to a tenant notwithstanding the tenant’s failure to deliver a timely notice of renewal. Ross v. T. Eaton Co. (1992), 11 O.R. (3d) 115 (Ont. C.A.); Dragon City Developments Inc. v. Wong, supra.

 

11     In Becker Milk Co. v. Goldy (1977), 18 O.R. (2d) 417 (Ont. H.C.); affd. (1978), 20 O.R. (2d) 400 (Ont. C.A.), the tenant sent a letter to the landlord advising of its exercise of a 5 year option to renew whereas the lease specified a renewal term of 10 years; and the court found the landlord was aware of the mistake yet remained silent. The landlord was estopped in the circumstances, from relying upon the clause.

 

 12     According to the landlord herein, at no time during the course of meetings in September, October 1996 and January 1997, did the tenant state that he intended to renew the lease on the stipulated terms but rather, he consistently attempted to negotiate a new and revised lease containing different terms and conditions. In Becker, the only error pertained to the recitation of the term of the lease. Clear unequivocal written notice was given by the tenant of the exercise of its option to renew. In this case, the letter sent on the tenant’s behalf contained no such notice. The law cannot impose upon the landlord an obligation to do the tenant’s work for it. The circumstances here do not create an estoppel as against the landlord.

 

 

13     The tenant also relies upon the equitable doctrine of waiver described by Lord Denning in W.J. Alan & Co. v. El Nasr Export & Import Co., [1972] 2 All E.R. 127 (Eng. C.A.), at 140 as follows:

 

… if one party, by his conduct, leads another to believe that strict rights arising under the contract will not be insisted on, intending that the other should act on that belief, and he does act on it, then the first party will not afterwards be allowed to insist on the strict legal rights when it would be inequitable for him to do so.

 

 See also Hughes v. Metropolitan Railway (1877), 2 App. Cas. 439 (U.K. H.L.), at 448; 6781427 Holdings Ltd. v. Alma Mater Society of University of British Columbia (1987), 36 D.L.R. (4th) 753 (B.C. S.C.); affd. (1987), 44 D.L.R. (4th) 257 (B.C. C.A.).

 

 

14     It is the tenant’s contention that the landlord waived its right to claim strict compliance with the terms of the option clause since it actively engaged in negotiations with the tenant without advising of its intention to insist upon its strict legal rights.

 

15     In Petridis v. Shabinsky (1982), 35 O.R. (2d) 215 (Ont. H.C.), the tenant failed to exercise a renewal option in accordance with the terms of the lease and the landlord sought vacant possession. As the tenant had entered negotiations with the landlord with respect to the renewal option within the relevant period, the principle of waiver was held to be applicable. In that case, the landlord had sent a letter to the tenant offering the tenant a new lease agreement after the expiry of the renewal period and the tenant had accepted the offer. By its actions, therefore, the landlord waived its right to insist upon strict compliance with the terms of the lease document. Its “peremptory immediate termination” was enforced with an extended time limit.

 

 16     In my opinion, the actions of the landlord herein in meeting with the tenant within the renewal period to discuss the lease provisions cannot invoke the equitable doctrine. The strict rights of the landlord were neither waived nor suspended in any way.

 

 

17     The final issue raised by the landlord concerns the matter of default in rental payments. Under the terms of the lease, the renewal option was only exercisable provided there was no default in payment of rent or performance of the terms, covenants and conditions contained in the lease. According to the landlord, at the time of the purported renewal on September 17, 1996 the tenant was in arrears of rent in the sum of $39, 221.09. Moreover, since January 1, 1994, the tenant had consistently failed to make rental payments in a timely fashion.

 

18     The tenant contends that it gave an assignment of monies to the landlord under a real property tax appeal in consideration of amounts owing. That is certainly so. However, I am satisfied on the evidence that the assignment took effect prior to January 1, 1994. The tenant also attested to an agreement to pay monthly rent of $15,000 to $20,000, as it was able. The landlord’s documentation tells a different story, including invoices of arrears which I find were sent on a yearly basis rather than cumulatively.

 

19     In my view, there is no issue of fact or credibility which requires a trial for its resolution. The tenant did not comply with section 3(b) of the lease. The landlord did not by its actions waive its rights nor is it estopped from demanding strict compliance with the renewal provisions. Upon taking a good hard look at the facts, I find that there is no genuine issue for trial.

 

20     Accordingly, the application is allowed and the cross-application is dismissed. If the parties are unable to agree on costs, they may arrange a conference call or meeting through my office.

 

Application granted.

 

END OF DOCUMENT