Withholding consent to assignments: a primer
The issue of when a landlord can refuse to consent to the assignment of a lease remains a notable source of litigation in the commercial real estate space. While lease agreements typically contain provisions permitting the tenant to assign upon securing the landlord’s consent (such consent not being unreasonably withheld), parties tend to arrive at significantly different interpretations of such clauses when faced with a dispute. The purpose of this article is to provide an overview of the law in this area in an effort to help landlords and tenants better position themselves when considering the assignment of commercial leases.
Exercising a termination clause requires strict satisfaction of any attached conditions
The Court of Appeal for Ontario recently articulated the importance of satisfying the conditions attached to termination clauses when seeking to terminate a lease. What the trial court considered to be a largely semantic point in Dunnville Soccer Park Corp. v. Haldimand (County), 2010 ONCA 680 was ultimately found to render the landlord’s termination invalid.
The issue that gave rise to the dispute in this case concerned a long-term lease of 16 acres of playing fields. Under the terms of this lease, the Dunnville Soccer Park Corporation (“Dunnville”) and the Haldimand Youth Soccer Club, as tenants, took on the responsibility of developing soccer facilities on the premises while the Haldimand County, as landlord, was tasked with maintaining the turf. A termination clause afforded the landlord the right to terminate upon 180 days’ notice on the condition that it provided the tenants with “another reasonably similar soccer facility”.
Sovereign Immunity and the Challenge of Leasing to Foreign State Tenants
Leasing real property to foreign states presents a unique challenge to landlords. The operation of the doctrine of sovereign immunity, if not properly addressed in the lease instrument, can severely impact a landlord’s ability to seek recourse from the courts when faced with a problematic tenant. The aim of this article is to concisely set out the principal issues that should be considered by landlords whose portfolios include consulates, embassies or other foreign state tenants.
Qualifying Criteria for Real Estate Investment Trusts Expected to Improve in 2011
Real estate investment trusts (“REITs”) are publicly-traded trusts that are considered attractive investment vehicles because they offer an exemption from the tax on distributions from specified investment flow-throughs. In December 2010, the federal government announced several proposed changes to the income tax rules applicable to REITs, a number of which will be of significance to the commercial real estate community.
The proposed amendments are chiefly concerned with the criteria that investment trusts must meet in order to qualify as REITs. Expected to come into force in 2011, these amendments will also be applicable on an elective basis for post-2006 taxation years if certain conditions are met. A brief overview of the most notable elements of the proposed amendments is provided below:
Entitlement to Post-Closing Property Tax Refunds: 80 Mornelle Properties Inc. v. Malla Properties Ltd.
80 Mornelle Properties Inc. (the “Vendor”) was the owner of an apartment building in Toronto prior to selling it to Malla Properties Inc. (the “Purchaser”) in October 2006. Before the sale, the Vendor retained lawyers to appeal the property’s tax assessment and continued to pursue the assessment appeal well after the transaction closed. The Vendor was eventually successful in this reassessment, with the result that a tax refund of $251,166.43 was owed for the period of 2003 to 2006.
The City of Toronto paid this refund to the Purchaser in compliance with section 306(2) of the City of Toronto Act, 2006. This section provides that property tax refunds are to be paid “to the owner of the land as shown on the tax roll on the date that the adjustment is made”. Upon learning of the refund, the Vendor asked the Purchaser for the refund less the portion of it that related to the period after the sale. When this request was refused, the Vendor commenced an application to force the Purchaser to disgorge a majority of the refund.
"Unreasonable" refusal to grant consent to a lease assignment
Commercial leases commonly provide that the tenant may not assign or sublet the lease without the landlord’s consent, such consent “not to be unreasonably withheld”. In Ontario, a landlord may not withhold its consent solely to secure a new advantage uncontemplated by the terms of the lease.
This issue recently came before the Ontario Superior Court of Justice in the case of Tradedge Inc. v. Tri-Novo Group Inc., 84 R.P.R. (4th) 84. There, the tenant’s business came under severe financial constraints and it entered into a sale agreement which was conditional on an assignment of the tenant’s lease.
Subrogated Claims by Insurers in Commercial Leases (Part VI) - Update on 1044589 Ontario Ltd. v. AB Autorama Ltd.
In several previous posts we have addressed recent cases relating to subrogated claims by insurers in commercial leases. A subrogated claim refers to the claim by which an insurance company seeks recovery of the amount it pays to a policy holder from a third party who may have caused the loss.
In October of 2008, we commented on the Ontario Superior Court of Justice’s decision in 1044589 Ontario Inc. c.o.b. Nantuckett Business Centre v. AB Autorama Ltd. (2008 CanLII 394435 ONSC) (“Autorama”). This post follows a reversal of that decision by the Ontario Court of Appeal.
Court of Appeal clarifies the law on prescriptive rights
There was an interesting recent Ontario Court of Appeal decision (Kaminskas v. Storm (2009), 95 O.R. (3d) 387) for those lawyers, like the writer, who developed his practice approaches at a time when most of the properties in
The Real Property Limitations Act says in Section 31 that a right to an easement may be acquired by prescription if actually used for twenty years without interruption and is deemed to be “absolute and indefeasible” after forty years unless it was enjoyed by some consent “expressly given or made…in writing”.
Kaminskas purchased a house in
Lang Michener LLP lawyers remain the leading experts on title insurance in Canada
Bruce McKenna, with significant assistance from Matthew German and Bob Fraser, has completely redrafted the title insurance sections of the CCH Ontario Real Estate Law Guide published by CCH Canada. These are the title insurance sections under the Divisions of the Guide relating to Professional Duties and Liabilities, Mortgages and Title Conveyancing. Bruce originally drafted them in 1997 and has updated them from time to time since then.
The Declining Importance of Tender in Transaction Disputes
Canadian courts continue to erode the traditional common law requirement that a non-defaulting party demonstrate its absolute willingness and ability to close a real estate transaction when responding to the default of the other party. As illustrated by the British Columbia Supreme Court in Tatla v. Lui,  B.C.J. No. 485, the process of “tendering” all closing documents and funds on the defaulting party is increasingly being rejected as a “meaningless ritual” and should no longer be seen as a determinative element influencing how real estate transaction disputes are resolved.
The dispute in Tatla arose when a purchaser breached a purchase and sale agreement and later sought the return of her deposit from trust on the grounds that the vendor failed to properly issue tender. While the purchaser acknowledged that she was responsible for the initial breach, she took the position that the vendor’s failure to demonstrate his capacity and intention to close the transaction by attending the Land Title Office on the closing date mandated the return of her deposit. In brief, she reasoned that both parties were in default of their obligations and consequently the deposit should be released back to her.