Introduction to Landlord and Tenant Law (19:I)
As contracts, tenancy agreements constitute commercial relations. The Commercial Tenancy Act, RSBC 1996, c 57, governs that aspect of tenancy. Special laws, rules, and procedures have been established for premises and tenancy agreements characterized as residential. Landlord and tenant matters not subject to the RTA, or exempted from particular provisions, are covered by the Commercial Tenancy Act. See RTB Policy Guideline 14: Type of Tenancy: Commercial or Residential.
A. Relationship of Landlord and Tenant
1. In General
Before entering into an agreement, a tenant should find out who owns the property and who rents the property to ensure that the new tenant is not leasing from a current tenant – see Section XV.A.2: Assignment and Subletting, below. A tenant should ensure that he or she does not enter into an agreement with a company that is not yet incorporated – see Section XV.A.3: Pre-Incorporation Contracts, below. A prospective tenant should perform a company search in order to determine if the company is incorporated. See Chapter 20 Small Claims Procedure for more information on how to do a company search. A prospective tenant may also want to do a title search at the Land Title Office to determine whether he or she is dealing with the registered owner or a tenant looking to sublease.
A new tenant should find out how the property is zoned to ensure lawful use of the property. Also, using the property for a different purpose than that outlined in the lease is a breach of the agreement. To vary the lease, both parties must consent.
2. Assignment and Subletting
When the tenant’s interest is conveyed to a third party for the remainder of the term, the lease is said to have been assigned. The assignee becomes a tenant of the landlord.
If the premises are to revert to the original tenant before the full term of the lease, a sub-lease is created. Note that a landlord-tenant relationship exists between the landlord and sub-tenant. If both parties live in the unit, payment of rent by a new tenant to the original tenant may also create a sub-tenancy.
Most leases require the landlord’s consent before an assignment or sublet is made. Such clauses usually specify that the landlord’s consent will not be unreasonably withheld. If the landlord does withhold his or her consent unreasonably, the tenant may proceed without consent, with litigation as the likely outcome. Tenants should decide if they want to deal with that or if they want to commence litigation on their own right to obtain an order that they can proceed. A landlord’s wish to charge higher rent or to prevent the tenant from receiving a premium by subletting are not reasonable grounds for withholding consent.
The onus is on the tenant to show that the landlord’s refusal is unreasonable. There are no fixed rules governing reasonable or unreasonable withholding of consent. The landlord can charge a fee for the tenant to sublet or assign the rental property, and that does not negate the landlord’s consent. The lease itself and all the circumstances must be considered.
3. Pre-Incorporation Contracts
A company is not bound by contracts it enters into before incorporation. Where a person enters into a contract in the name of a company before that company’s incorporation, that person may be liable for breach of warranty. To avoid difficulty, the lease should be entered into personally with the right to assign the lease to the company once incorporated.
4. Partnerships
A partner enters into contracts on behalf of all partners for any transaction that is in the ordinary course of business. Thus, a lease entered into in the firm’s name is binding on the firm and its partners.
B. The Agreement
1. Distinction between Lease and License
A license is a purely contractual relationship. It gives the licensee no interest in the licensor’s real property. Restaurants that operate in department stores are usually run as a licensee liquor arrangement, for example.
The courts distinguish leases from licenses by examining whether the parties intended to grant exclusive possession to the occupants, or merely permission to occupy subject to the rights of the owner. It is important for a prospective tenant to read the contract to determine what type of relationship they are entering into. Words in the agreement such as “lease”, “landlord” or “tenant” are, in the absence of a contrary statement, conclusive evidence of an intention to create a lease. Exclusive possession of the tenant does not require absolute exclusion of the landlord. If the contract refers to a “joint venture,” then it is probably NOT a lease; a joint venture creates liabilities in the tenant and does not grant exclusive possession or an interest in the land.
2. Distinction between Lease and Agreement to Lease
A lease is an immediate conveyance of land (though possession may be postponed) while an agreement for lease requires the parties to execute a lease at a later date. However, where the tenant is in possession, an agreement to lease may be construed as a lease.