Chapter 12 (Assignment 9 Commercial Tenancies) Flashcards
Implied covenants are terms that apply to all commercial leasing arrangements by virtue of the common law. Which one of the
following is NOT an implied covenant?
1) A tenant’s right to quiet enjoyment
2) A landlord’s duty to maintain furnished premises in a condition that is reasonably fit for human occupation
3) A tenant’s duty to repair structural defects
4) A landlord’s duty to deliver the premises to the tenant at the beginning of the lease term
A tenant’s duty to repair structural defects
Option (3) is correct because although the tenant has an implied duty to treat the premises in a “tenant-like manner”, there is no
implied duty to repair structural defects. As with all duties, this can be varied by express agreement in the lease contract. Option
Larry is a tenant who has entered into a commercial lease for a term of 25 years with an option to renew for 10 years. Does Larry
have to pay property transfer tax (PTT) on this lease?
Yes, but only if Larry registers the lease.
property transfer tax is payable by the transferee upon registration of a lease for a term of more
than 30 years. When calculating the term, all options to renew must be included, and therefore the “term” of the lease is 35 years (25 years + 10 year renewal).
George is the owner of a commercial building in east Vancouver. George’s nephew, Harry, is an aspiring artist who needs space to produce and store his sculptures. George has let Harry use the building for this purpose on an informal basis, but George and
Harry have not entered into a lease agreement and Harry is paying no rent. What is the proper name for a tenancy of this sort?
Tenancy at will
a tenancy at will arises when a person is permitted to occupy the premises on an informal basis
without paying rent.
Just over three years ago, Jenny and Beth entered into a tenancy agreement, whereby Jenny would lease Beth’s commercial space for $50,000 per year. That tenancy agreement has come to an end, but Jenny has continued to occupy the premises (she is “holding over”). The agreement entered into by Jenny and Beth says nothing about the amount of rent that is due in a holdover
period. What does the Commercial Tenancy Act say about this situation?
The Act stipulates that the tenant must pay double the yearly value of the land for the duration of the holdover period.
correct because section 15 of the Commercial Tenancy Act (the “Act”) sets out the rules for determining rent during a
holdover period when the agreement is silent on the matter. The rule is that the tenant must pay double the yearly value of the land during any holdover period.
Which of the following statements is TRUE regarding the distinction between a license and a lease?
1) A license is an interest in land, while a lease is not.
2) A lease “runs with the land” and binds successive owners of the property, while a license is only valid amongst the
parties to the licensee agreement.
3) A license creates a landlord-tenant relationship, while a lease does not.
4) A license “runs with the land” and binds successive owners of the property, while a lease is only valid amongst the
parties to the lease agreement.
A lease “runs with the land” and binds successive owners of the property, while a license is only valid amongst the
parties to the licensee agreement.
correct because a license is a contractual agreement that only binds the parties to that agreement, while a lease is an interest in land that “runs with the land” and binds subsequent owners (provided the relevant registration and notice
requirements are met).
Which of the following statement(s) is/are TRUE regarding priority of title during foreclosure?
1) If a lease is registered on title before a mortgage, the common law rule is that the lease has priority and the mortgagee cannot obtain possession of the premises until the lease expires.
2) If a mortgage is registered on title before a lease, the common law rule is that the lender is entitled to demand
possession from the tenant, even if the lease term has not yet expired.
3) Tenants, mortgagees, and other affected individuals are free to enter into priority agreement contracts to modify their priority relationship.
4) All of the above
ALL ARE TRUE
Option (1) is
incorrect because it is true that if the lease is registered on title before the mortgage, at common law the lease has priority and the mortgagee can only obtain possession once the lease has expired.
Option (2) is incorrect because it is true that if the mortgage is registered on title before the lease, at common law the lender can obtain possession from the tenant, even if the lease has not expired.
Option (3) is incorrect because it is true that the common law presumptions governing the order of priority
can be modified by way of a priority agreement contract.
Larry Landowner owns a large property on the west side of Vancouver and is interested in subdividing his property into smaller parcels and leasing out some or all of those parcels. Larry is unsure of how section 73 of the Land Title Act applies to his situation and whether or not he needs subdivision approval from the City of Vancouver. You correctly advise him that:
He will only need subdivision approval if he intends to lease one (or more) of the parcels for more than three years.
because section 73 of the Land Title Act (“LTA”) stipulates that unless government approval is obtained, a person cannot subdivide a parcel of land into smaller parcels for the purposes of leasing it for a term exceeding three years.
Steve owns a pulp mill that frequently makes use of floating booms to gather and hold logs prior to processing. Steve wants to place some new booms on the Fraser River near his mill, directly adjacent to land owned by Theresa. If Steve places the booms in that location, Theresa’s access to the water will be restricted. What is true about this scenario?
Theresa has “upland owners’ rights”, which are rights to access the river adjacent to her property. Theresa can charge
rent for uses of the river that block this access.
because landowners have “riparian rights” or “upland owners’ rights” to access the water adjacent to their property. These rights, held by Theresa, allow her to prevent Steve from placing a booming ground or to charge him rent for doing
so.
Assisting with the tenant selection process is a key aspect of a property manager’s job. A landlord’s key objective in this process is to secure tenants with a good “covenant”. In this context, which of the following is the best description of the meaning of the
term “covenant”?
1) A tenant’s ability to generate income
2) A tenant’s ability to draw public attention to a commercial space
3) A tenant’s financial worth and ability to pay rent
4) A tenant’s rental history
A tenant’s financial worth and ability to pay rent
because, in this context, the term “covenant” refers to a tenant’s financial worth and their ability to pay rent.
Which of the following is a TRUE statement about registration of leasehold interests in British Columbia?
1) Leases for less than five years are valid against third parties, even if unregistered.
2) Leases for three years or less are valid against third parties, even if unregistered, so long as there is actual occupation under the lease.
3) Once ownership of a property changes hands, the new owner will not be legally obliged to recognize a pre-existing
lease.
4) Landlords generally prefer that their tenants’ leases are registered on title.
Leases for three years or less are valid against third parties, even if unregistered, so long as there is actual occupation under the lease.
because it is true that, provided there is actual occupation, leases for three years or less need not be
registered to be enforced against third parties.
A tenancy that automatically arises on the last day of a tenancy for a further term of the same length is referred to as a:
periodic tenancy.
What is the best definition of the term “tenant mix”?
The variety of goods and services that will be available to customers of a shopping centre from all of the businesses in
the shopping centre
The _____________________ is the single most important document for determining the rights and obligations of the landlord
and tenant in a commercial tenancy.
lease agreement
The main function of the Commercial Tenancy Act is to:
set out the various remedies available to the landlord in the event a tenant defaults on the lease agreement.
When a commercial tenant fails to pay rent, the landlord may seize and sell the tenant’s personal property to recover the unpaid rent. What is this called?
Rent Distress Act
Leases for terms of more than three years must be in writing and signed by the parties. Which statute imposes this requirement?
Law and Equity Act
the Law and Equity Act states that contracts dealing with land, including leases for a term of more than three years, must generally be in writing and signed by the parties.
In the context of shopping centre leases, what is a “radius clause”?
A clause that prohibits a tenant from opening another store within a specified radius of the shopping centre
Commercial tenancies are subject to the common law and various statutes under what?
Commercial Tenancy Act.
What is the original source for dealing with commercial tenancies?
common law
The common law is a body of law developed over centuries from the decisions of judges.
Unlike civil law, the common law is not a set of written rules.
Define Implied Covenant
A legally binding promise that is included in every lease agreement by virtue of the common law, even though it usually does not appear in the written contract.
What is the Derogation from Grant?
The landlord cannot deliberately prejudice any rights which he has granted to the tenant under the lease.
What is landlord duty to repair?
Implied covenant that leased furnished premises be reasonably fit for human habitation and occupation.
The law does not impose a similar obligation for unfurnished premises. The doctrine of caveat lessee (tenant beware) applies in commercial tenancies.
What is the tenant duty to repair?
Implied covenant that the tenant will treat the premises in a “tenant-like” manner.
A tenant must do what is required to maintain the premises as would a reasonable tenant.
Ex: replacing burnt-out light bulbs or unplugging a clogged sink.
The tenant has no implied obligation to repair the premises.
When do commercial tenants pay Property Transfer Tax?
This is relevant in the commercial tenancies context because PTT is payable on registration of a lease for a term of more than 30 years.
This includes a lease that is renewed or extended, even if these options have not been exercised.
Commercial leases of over 3 years must comply with:
Law and Equity Act,
which generally requires them to be in writing if they are to be enforceable in the courts.
Even when Section 59 does not apply, it is strongly recommended that a written document be prepared and signed by both parties to avoid later disputes.
Define Holding Over
When a tenant does not vacate its premises at the expiry of the lease term.
Define Tenancy at Sufferance
When a tenant holds over without the consent of the landlord, a “Tenancy at Sufferance” is created, provided the landlord does not accept rent payments from the tenant after expiry.
If landlord accepts rent, a periodic tenancy on the same terms is created
If landlord does not accept rent payment, there is no lease in place and the landlord does not consent to the tenant occupying the space, this creates a” Tenancy of Sufferance”
Can be avoided if a “holding over” clause is included in the lease document
A lease and license are different in two ways:
1) At common law, a LEASE creates an INTEREST IN LAND , while a LICENSE creates a CONTRACTUAL RIGHT A
LEASE is an INTEREST IN LAND it “runs with the land” and binds successors in title. A lease is enforceable against subsequent owners of the land.
2) At common law, a lease CREATES the RELATIONSHIP of landlord and tenant and a LICENSE DOES NOT. Landlord and tenant implies many rights and obligations between the parties to the lease. A licence is a contract and therefore creates only those rights and obligations stated in the contract.
Define Easements:
EASEMENTS:
A right, attached to one piece of land, to access and use a portion of neighbouring property for a specific purpose (a right for occupiers of property A to transverse across a section of property B to reach the riverfront).
Define Restrictive Covenants:
A covenant restricting the use of the land of the covenanter (the servant tenement) for the benefit of land belonging to the covenantee (the dominant tenement).
Ex: would be a restriction on the height of a building on one piece of land so that adjacent land is not in shadow
Torrens System and Land Title:
The title provides evidence of the registered owner of the land and also documents any charges or encumbrances affecting the land.
- leasehold interests
- easements
- restrictive covenants
- mortgages
- liens
What is priority in common law?
The common-law rule is that a lease made before a mortgage will have priority in the event of foreclosure and,
regardless of any other rights, the mortgage (lender) cannot get possession of the rented premises until the lease expires (this is referred to as the “first in time, first in right rule” rule).
