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Landlord Insisting on Management Fee Released Tenant from Lease Obligations
The British Columbia Supreme Court’s decision in A.C. Scott Financial (FIR) Inc. v. PDF Training Inc. (2004) 25 R.P.R. (4th) 94 (B.C.S.C.) contains a warning to landlords negotiating leases following execution of an agreement to lease. Taking a position that is held to be contrary to the agreement to lease could let the tenant off the hook.
Scott Financial (FIR) Inc. (“Scott”) and PDF Training Inc. (“PDF”) entered into an agreement to lease for over 19,000 square feet. The agreement provided a process for execution of a formal lease. PDF was not entitled to possession until the lease was executed.
The agreement to lease had a line item contemplating a management fee. However, the amount of the fee had been left blank. In the lease negotiations Scott insisted on a 4% management fee, arguing it was standard in the market and something contemplated to be settled in the lease negotiations.
The court held that there was a binding agreement to lease between Scott and PDF that did not require payment of a management fee. Scott’s insistence on the fee and its refusal to provide a lease that did not include the fee was a breach of Scott’s obligations under the agreement to lease. This prevented PDF from taking possession and represented a repudiation of the lease by Scott. PDF’s action of not paying rent was seen as an acceptance of such repudiation and PDF therefore had no further obligations under the agreement to lease. PDF was entitled to the return of its deposit and damages for certain design costs it incurred.
There was a separate issue in this case which resulted in PDF not being entirely off the hook. PDF had entered to do some work and the court held it liable for trespass.
May 10, 2005 in Leasing | Permalink
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