Landlord needs proper demolition permit before making tenant vacate: Ontario Court of Appeal

The Ontario Court of Appeal has ruled that fairness, not technicality, is the priority when interpreting a notice to vacate a commercial lease. Using this approach, the court found it fair to require a landlord to fulfill its obligations under a lease when it came to proper notice of demolition.

The case of Bennett Law Chambers Professional Corporation v. Camcentre Holdings Inc., 2022 ONCA 658 involved a landlord-tenant dispute. The tenant, Bennett Law Chambers Professional Corporation, entered into a five-year lease in 2011 for a suite in a building owned by Desjardins Financial Security Life Insurance Company. In 2015, an amending agreement extended the lease for seven more years, expiring in 2023.

Camcentre Holdings bought the building so that it could tear it down and develop it into a condominium complex, and Desjardins assigned the lease to Camcentre. Camcentre scheduled asbestos removal, to start in May 2020 and last for two months, so that demolition could begin.

Although Camcentre asked all if the building’s tenants to vacate, some of them stayed. In October 2019, Camcentre delivered a written notice of the lease termination to Bennett Law Chambers. The notice required the tenant to deliver vacant possession of the leased premises by April 30, 2020. The tenant refused.

Bennett Law filed an application seeking a declaration that the termination notice did not terminate the lease because the landlord failed to obtain a demolition permit. Camcentre brought a cross-application, which alleged that the tenant breached its lease by transferring it without consent to a corporation and by allowing other lawyers and paralegals to use the leased premises as subtenants. The landlord contended that these breaches terminated the lease.

The application judge determined that the lease continued to be valid and subsisting after April 30, 2020 because the termination notice was not effective. The judge rejected Camcentre’s argument that asbestos removal amounted to commencement of the demolition process under the lease and found that the landlord needed to obtain a demolition permit since the termination notice named “demolition” as the reason for requiring vacant possession.

First, the appellate court agreed with the application judge’s finding that the termination notice failed to comply with the lease and was thus ineffective to terminate the lease.

The appellate court found that the judge correctly referred to the cases of Goodyear Canada Inc. v. Burnhamthorpe Square Inc. (1992), 41 O.R. (3d) 321, which discussed the proper approach for the interpretation and enforcement of a notice to vacate a commercial lease, and Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, which covered the interpretation of commercial contracts.

The judge properly gave effect to the language of the termination notice, including the word “demolition,” the appellate court said. While the tenant knew that the landlord intended to redevelop the property before the end of the lease term, it was entitled to rely on the words of the notice and the lease and to believe that the landlord needed a demolition permit first.

Next, the appellate court tackled Camcentre’s argument that asbestos removal was considered the commencement of the demolition process. The court agreed with the judge’s conclusion that asbestos removal was a precondition to beginning demolition but should not be deemed the commencement of demolition.