Landlord's duty to be honest did not limit its freedom to terminate leases

Real Property - Landlord and tenant - Forfeiture and re-entry

Tenant was high-volume discount retailer, it entered lease with landlord of shopping mall to lease retail premises on upper level of mall, and parties entered into second lease to rent retail premises on lower level of mall. Tenant took possession of premises on as-is basis, with shared understanding that repairs to escalators and freight elevator would be performed in due course. Tenant entered into sublease agreement, but subtenant defaulted on sublease and tenant terminated sublease. Landlord served tenant with notice of default stating that tenant breached upper floor lease by subletting premises and failing to activate escalators and elevator, and it also delivered notices of termination of leases. Tenant brought motion for declaration that leases were valid and in good standing or it sought order granting relief against forfeiture pursuant to s. 20(1) of Commercial Tenancies Act from notice of default and notices of termination delivered by landlord. Motion granted in part. Landlord's notice of termination validly invoked termination provisions under leases, and this was not case for granting relief against forfeiture. Under leases landlord was not required to give reasons for terminating leases. Relief from forfeiture was not available if lease was terminated as result of right of landlord to do so. Landlord was entitled to exercise its contractual right to terminate leases provided only that requisite written notice of leases was provided, which was what parties bargained for and it was all that tenant was entitled to. Landlord complied with duty to be honest, which did not limit its freedom to terminate leases and enter into future lease with third party. Termination provisions under lease were unambiguous, and required no condition precedent for either party to exercise their termination rights. Parties were sophisticated commercial actors with substantial business activities who were more than capable of safeguarding their commercial interests during lease negotiations.

Zenex Enterprises v. Promenade (2019), 2019 CarswellOnt 8605, 2019 ONSC 3262, Doi J. (Ont. S.C.J.).

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