Commercial Landlords Beware!

September 4th, 2012 by

Commercial Landlords Beware!

A recent decision of Mr. Justice Price drives home the significant risk a landlord takes by failing to give proper notice before trying to terminate a commercial lease.

In Dasham Carriers v. Gerlach, the tenant sought damages on the basis that the landlord had, among other things, improperly terminated the lease and locked out the tenant without having provided the notice required under s. 19(2) of the Commercial Tenancies Act.

The landlord, David Gerlach, maintained that the tenant’s lease had been correctly terminated because he had given notice of termination on March 3, 2011, and a second time on May 6, 2012, after the tenant had breached its lease obligations as well as health and safety regulations.

In reaching his decision, Mr. Justice Price pointed out that s. 19(2) of the Act is “clear and mandatory”.  Under it, a landlord cannot enforce its right to re-enter leased premises (i.e., take them over, changing the locks, etc) or for forfeiture against a tenant in breach of any covenant or condition (except for failure to pay rent, which is treated differently) unless it gives the tenant written notice that:

(a)  specifies the breach in question;

(b)  requires the tenant to remedy the breach, if this is possible, even if it   is fundamental to the lease agreement, including abandonment of the premises;

(c)  requires the tenant to compensate the landlord for the breach if it cannot be remedied; and

(d)  gives the tenant a reasonable period to do what is set out in (b) or (c), above.

The judge found that neither the notices of termination nor other communication from the landlord met the requirements of s. 19(2).  As a result, the landlord was not entitled to terminate the lease and was ordered to pay damages of just over $145,000 to the tenant.

As the foregoing illustrates, an improper attempt to terminate a commercial lease can turn out rather badly.  Before taking any steps to do so, a landlord should weigh the matter carefully and consider getting informed legal advice. Otherwise, it risks finding itself in the same situation as Mr. Gerlach: with the aggravation and expense of litigation and a judgment against it.

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