The applicant landlord sought a declaration that a commercial tenant was required to pay its proportionate share of the cost of rehabilitating a shopping centre parking lot as additional rent under a lease provision requiring tenants to pay common area maintenance costs for repairs and maintenance.
The dispute turned on whether the parking lot rehabilitation constituted a repair or a capital expenditure under “accepted accounting practice.” After considering expert engineering and accounting evidence and principles drawn from GAAP and relevant case law, the court concluded that the work significantly extended the life of the parking lot and reduced operating costs, thereby enhancing its service potential.
The court held that the rehabilitation constituted a capital expenditure rather than a repair within the meaning of the lease.
Accordingly, the tenant was not responsible for the cost and was entitled to set-off amounts already paid.
