Commercial Tenancies Flashcards

1
Q

When a tenant has a lease, what does the landlord have?

A

the landlord has a reversion - the right to retake the land when the tenant’s estate ends

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2
Q

What is a lease?

A

also called ‘demise’ or ‘demised interest’ - A lease grants the absolute rights of possession for a definite period of time

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3
Q

How are leases created?

A

They are created by contract (either express or implied)

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4
Q

How did Highway Properties change the relationship between leases and property law?

A

Highway Properties says that even after possession, some aspects of contract law still apply - a commercial lease is treated as both a conveyance and a contract

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5
Q

What is the difference between a lease and a license

A

if the agreement does not grant exclusive possession for a definite period of time, it is a license

at common law a license is revocable at any time by the licensor, not true of leases

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6
Q

True or False: the rights to a lease are inheritable?

A

True, interests in a lease are alienable and therefore inheritable, but often they are too short to be inherited

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7
Q

What is a license?

A

A license is the permission to use land for some purpose without certainty of duration
it is revocable at any time by the licensor

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8
Q

True or False: In deciding if a lease exists, it is the intention of the parties that matters?

A

This is one of the approaches to a lease: focusing on the intention to create the landlord/tenant relationship. This is the approach used by the courts (what the document SAYS)

Other approach is to focus on whether the agreement grants exclusive possession (what the document DOES)

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9
Q

What is a covenant?

A

a term in the lease outside of the grant of land that usually involves an agreement to undertake certain duties

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10
Q

Define independence of covenants

A

the failure to perform a covenant dos not give a right to terminate the lease, nor the right of re-entry to the landlord

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11
Q

What is a conditional covenant?

A

A term in the lease that, if breached, allows for termination
e.g., rent - but by statute this is a condition with a grace period of 15 days (not a covenant)
CHECK THIS WITH PHILLIPS???

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12
Q

True or False: a tenant can terminate a lease by abandoning the premises?

A

False, if a tenant abandons the premises they are still responsible for rent

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13
Q

If a tenant abandons the leased premises, does the landlord have a duty to mitigate their damages?

A

No, there is no duty to mitigate - the tenant is on the hook for the whole lease unless the landlord finds a new tenant

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14
Q

Why does the landlord finding a new tenant (after the original tenant abandoned the premises) terminate the original lease and release the original tenant from liablity?

A

if the landlord gets another tenant then someone else has been granted exclusive possession and the original tenant’s duties are relieved

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15
Q

If the tenant abandons, are they immediately liable for all of the rent due?

A

No, the tenant is not liable until the end of the term - you can’t say they haven’t paid until they haven’t paid

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16
Q

How can a lease be ended early?

A

A surrender is required to end a lease early

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17
Q

What is a surrender?

A

a bilateral agreement to end the leasehold relationship and revert possession to the landlord - landlord HAS to agree

if a surrender occurs, the tenant is relieved of their liability for the remainder of the lease

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18
Q

Importance of MetroMatic?

A

(lease of laundry room in building)
illustrative of the courts looking to the intention of the lease agreement - it conferred exclusive possession and control of the premises and so was a lease

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19
Q

What are the mechanisms of surrender?

A

1) acts of the parties: parties explicitly agree
2) operation of the law: parties participate in a course of action inconsistent with the continued existence of the lease -> implied surrender
i) acceptance of a new interest by the lessee
ii) acceptance by possession of the landlord (landlord re-enters with intention to possess OR signs a lease with a new tenant)

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20
Q

If a tenant has left the premises and the landlord enters with the intention of fixing a window, but not with the intention to re-possess the premises, is this a surrender?

A

no, the landlord must have intention to possess/retake control of the premises (Goldhar)

21
Q

What are the Landlord’s options if a tenant abandons?

A
  1. Keep the lease alive and sue for rent and damages - instalment litigation + distress (Goldhar)
  2. Keep the lease alive and relet the property on tenant’s behalf + distress (Goldhar)
  3. accept the surrender and terminate the lease (Goldhar)
  4. accept the surrender and terminate the lease, but give notice to the tenant that the landlord will claim expectation damages (Highway properties)
22
Q

Does the landlord have a duty to mitigate when a tenant abandons?

A

No, there is no duty to mitigate but if the landlord does mitigate, that is taken into account in any action for compensation from the tenant (Postal Promotions)

23
Q

Importance of Goldhar?

A

(commercial lease; lets husband use space)
outlines the options a landlord has when a tenant abandons the property

24
Q

is it considered a surrender if the landlord notifies a tenant who has abandoned the premises that they are renting the space out on their behalf?

A

No, if the original tenant is notified there is no acceptance of surrender

25
Q

Importance of Highway Properties?

A

(supermarket in mall)
- introduced a 4th course of action (after Goldhar) that a landlord can take when a tenant abandons the property
- treats commercial tenancies more like contracts rather than just a conveyance
- brings property law closer to contract law

26
Q

Importance of Postal Promotions?

A

(20 yr commercial lease)
there is no duty to mitigate, but if a landlord does mitigate it is taken into account when determining what the tenant owes

27
Q

What are two covenants implied into every lease?

A

covenant for quiet enjoyment
covenant not to derogate from grant

28
Q

What can a breach of one of the implied covenants in a lease result in?

A
  • the covenants are independent so a breach gives rise to an action in damages
  • however, tenants can often successfully argue that a breach amounts to constructive eviction and end the lease
29
Q

Describe the covenant for quiet enjoyment

A

the tenant has the right to possess the whole of the land granted without an interference with their “quiet and peaceful possession” (Owen v Gadd)

historically this only applied to physical interference, but has expanded to include
1) indirect interference with use/access/privacy
2) interference with comfort

the interference must be more than a mere inconvenience

30
Q

Describe the covenant not to derogate from grant

A

The landlord cannot render the land substantially less fit for the purpose for for which it was let (Harmer v Jumbil)

this requires a total interference - the tenant must be actually prevented from using the premises for their intended use - no physical/directness requirement

does NOT include actions that reduce the profitability of the premises as long as they can still be used for the purposes for which they were let (Port v Griffith)

landlord’s knowledge is irrelevant

31
Q

Does the reduction in profitability of the premises count as a breach of the landlord’s covenant to not derogate from grant?

A

no, there is no derogation if the premises can still be used for the purposes for which they were let

32
Q

Importance of Owen v Gadd?

A

(scaffolding outside shop)
example of a breach of the covenant of quiet enjoyment - describes that there must be some physical interference that substantially interferes with the ordinary and lawful enjoyment of the lessor

33
Q

Importance of Harmer v Jumbil?

A

(explosives magazine next to mining operation)
example of a breach of the covenant of derogation from grant
the landlord made it impossible for the lessee to carry on their business on the premises

Knowledge of the landlord is not relevant

34
Q

Importance of Port v Griffith?

A

(lease neighbouring space to competitor)
illustrates that the reduction in profitability of the premises is not a derogation of grant
not a derogation for a landlord to permit a competitor onto neighbouring premises

35
Q

Landlords and Tenants have rights that come from which three sources?

A

1) implied by common law
2) negotiated between the parties (express covenants, terms in lease)
3) statute

36
Q

What are a landlord’s remedies for failure to pay rent?

A

1) forfeiture of the lease
2) distress

37
Q

Is charging rent required by common law?

A

No, but if a landlord does charge rent it imposes an obligation to pay landlord remedies for failure to pay

38
Q

Define forfeiture of a commercial lease

A

if rent has been unpaid for 15 days, the landlord may re-enter (retake possession of the premises)
can be exercised either through physical re-entry or through an action in court for possession

39
Q

what are two ways in which contract law has been incorporated into property law?

A

1) highway properties: landlord can accept a tenant’s surrender and give notice that they will be claiming expectation damages
2) fundamental breach - if either party breaches a covenant that is so fundamental to the lease that is breach constitutes a fundamental breach, the other party is entitled to terminated the contract

40
Q

what is the test for forfeiture of a commercial lease?

A

1) notice of the specific breach must be given
2) forfeiture must be demonstrated by an unequivocal act (Country Kitchen)
3) any termination procedures in the lease are strictly enforced

41
Q

Define distress

A
  • landlords can take goods of the tenant that are on the rented premises and can sell them to cover the rent
  • keeps the lease alive
  • landlord must wait 5 days and get the goods appraised before selling them. Any surplus can be kept, unless tenant requests it back
  • tenant can sue for damages if there is excessive distress
42
Q

what is the relationship between forfeiture and distress?

A
  • forfeiture and distress are mutually exclusive
  • if the landlord chooses to forfeit, they are no longer in the relationship and cannot choose distress
  • s. 41 is the exception
43
Q

Importance of Country Kitchen?

A

(behind on rent)
- illustrates the mutual exclusivity of forfeiture and distress
- illustrates the forfeiture must be demonstrated by an unequivocal act

the court said distress was illegal, but the clause in the lease allows them to retain, appraise, and sell the tenants property to satisfy the rent (distress without used the word distress…)
Seems wrong, insists not distress, but modifies it so it looks like distress

44
Q

What are the two main criteria considered when a court determines if a commercial tenant has relief against forfeiture?

A
  1. whether the landlord can be adequately compensated by money or imposition of terms
  2. the hardship that would be imposed on the tenant if relief is not granted, in view of the extent of the tenant’s investment in the premises
45
Q

Importance of Re Jeans?

A

(always late with rent and other breaches)
illustrates the circumstances when relief is granted to a tenant, and when it is not
taking relevant circumstances into account shows multiple breaches of the covenants and bad behaviour –> not a case of hardship, but careless oversight

46
Q

Importance of COB Restaurant?

A

the power of relief against forfeiture is discretionary and fact-specific

47
Q

What are the typical factors weighing against a party seeking relief?

A

1) the conduct of the applicant and gravity of the breach
2) whether the object of the forfeiture is to secure the payment of $
3) any discrepancy between the value of the property forfeited and the damage caused by the breach

48
Q

What is the power of relief against forfeiture predicated on?

A

the existence of circumstances where enforcing a contractual right of forfeiture would impose an inequitable consequence on the party that breached the contract