Landlord failed to give tenant proper notice of default: Ontario Court of Appeal

Lease agreement entitled landlord to terminate lease by notice following event of default

Landlord failed to give tenant proper notice of default: Ontario Court of Appeal

If the landlord wants to rely on existing rent arrears to terminate a lease, the tenant is entitled to notice of the precise amount owed and the landlord’s demand for payment, the Ontario Court of Appeal has ruled.

The case of Art for Everyday Inc. v. Canarctic J.F.K. Inc., 2022 ONCA 747, involved a lease agreement that entitled the appellant landlord to terminate a lease by notice following an event of default.

Section 13.1 of the lease agreement provided that an event of default occurred when the tenant failed to pay rent due within five days from the landlord’s written notice, which should include certain particulars and a demand that the tenant pay the arrears within a stipulated period of no less than five days.

Between May 8 and June 14, 2020, the landlord sent the respondent tenant eight emails about rent arrears, some of which specified the quantum of arrears. In a June 20 email, the landlord informed the tenant that it was in default of paying rent owed under the lease. This email did not mention the precise amount due for arrears and interest.

In December 2021, Justice Andra Pollak of the Ontario Superior Court of Justice determined that the landlord’s supposed termination of the lease by a July 14, 2020, letter was invalid, that the lease remained in full force and effect, and that she would have granted the tenant relief from forfeiture if necessary.

No proper notice to tenant

The Court of Appeal dismissed the appeal and awarded costs of the appeal to the tenant on a partial indemnity scale fixed in the agreed amount of $20,000, inclusive of disbursements and harmonized sales tax.

The appellate court ruled that the application judge made no errors in concluding that the landlord’s notice of termination dated July 14, 2020, was invalid, considering that the June 20 email served as the landlord’s most recent notice of rent arrears and failed to include the requirements under the lease agreement.

The application judge properly concluded that the landlord failed to give the tenant proper written notice of default and failed to warn the tenant of its intention to terminate the lease if the specified rental arrears were unpaid by a particular date, the appellate court said, pointing out that the only specific consequence of non-payment that the landlord mentioned in its emails was that interest was accruing on the outstanding arrears.

Even assuming that a landlord was not generally required to warn a tenant of an intention to terminate a lease when giving a written notice of default, the appellate court found no errors in the judge’s conclusion that a warning was required in this case. It was fair to require the landlord to warn the tenant before resorting to termination since the landlord sent multiple emails about rent arrears and only warned the tenant about the fact that interest was accruing on such arrears.

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