Difference between revisions of "Commercial Tenancies (19:XIV)"

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.  

*c) While a seal is no longer required for Land Title Office registration, if one of the parties to a lease is a corporation, its seal should be affixed to ensure the agreement is binding on the corporation, and to avoid any argument that the agreement was made without consideration; and  

Driveways, walkways, parking and delivery areas, lawns, lobbies, elevators, corridors, interior mall space, and common washrooms are normally common areas in which the tenant does not have exclusive possession. However, the tenant is often required to pay a share of the costs for the  maintenance of these areas. The lease agreement may also provide the tenant with an easement, subject to restrictions on how and when the common areas may be used.  

A fixture is annexed or fastened to the real property. They are either tenant’s fixtures, and therefore removable, or landlord’s fixtures,  which are permanent. Tenant’s fixtures are annexed for the purposes of the tenant’s trade, ornamentation, or convenience. Landlord’s fixtures  are installed by the landlord, previous tenants, or by the present tenant. They have become part of the realty and their removal would constitute waste: see ''Stack v Eaton'' (1902), 4 OLR 335 (Div Ct).  

In commercial leases, security deposits are intended to cover damages for breach of a covenant or condition or to ensure a tenant will go into possession. The landlord’s covenant to repay the deposit is collateral to the lease, and personal to the landlord. Thus, if the landlord sells, his or her successor is not bound to repay the deposit.  

Technically, rent is a contractual payment for the use of property. Commercial leases often also include additional rents such as a percentage  of the tenant’s sales or profits, and the tenant’s portion of common expenses. By defining additional rents as part of the rent, the landlord gains the right to end the lease for non-payment of these amounts. Unless otherwise provided for, it is the tenant’s duty to seek out and pay  the landlord. The tenant also bears the risk of a late payment if he or she uses the mail.  

Most commercial leases operate on the net lease concept. This means that fixed rent (dollars-per-square foot or dollars-per-month) is to be net  to the landlord, with the tenant paying for all costs in operating the leased premises as additional rent. Thus, substantial payments can be made as “additional rent” to cover the tenant’s portion of the landlord’s expenses. This concept is also known as “triple net”.  

A commercial landlord may distrain (seize personal property for non-payment of rent), while a residential landlord may not (regardless of any rental arrears). The personal property being distrained must be located in the rented premises and the landlord must give notice before seizing  the property. The tenant will suffer a  penalty  if  he  or  she  removes  the  goods  to prevent  distrainment.  Distrainment  keeps  the  tenancy alive.  Usually  the  month  after distrainment  the  tenant  will  be  evicted  if  there  remain  rent  arrears  or  if  new  rent  arrears accrue.