ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 11-30960
DATE: 2012-10-29
B E T W E E N:
Parsons Precast Inc.
Don Morris, for the Applicant
Applicant
- and -
Anna Sbrissa and Armando Sbrissa
Ray DiGregorio, for the Respondents
Respondents
HEARD: October 24, 2012
GLITHERO J.
RULING ON APPLICATION
[ 1 ] This matter comes before me as an application as the parties agree that the outcome of the dispute between the parties is dependent upon an interpretation of the commercial lease entered into between them. Specifically in issue is the amount of $14,553.00 which is said to be the applicant’s proportionate share of the cost of repaving a parking lot on the premises owned by the respondents and rented in part by the applicant. Additionally, there is a dispute over a claim for $2,450.00, being the cost of replacing a commercial vehicle doorway, claimed by the respondents from the applicant on the basis that the applicant damaged the door and is responsible for its repair.
[ 2 ] The applicant company, the tenant, rented the commercial space from the respondents by a written lease dated October 18, 2004 initially for a three year period commencing November 1, 2004 and ending October 31, 2007. Subsequently the parties entered into a written renewal for a period of two years ending October 31, 2009, and then a subsequent written renewal for a further two years ending October 31, 2011.
[ 3 ] The lease is on a “net-net basis” and the lease provided that it was a “completely care-free net least to the lessor”.
[ 4 ] The initial lease called for annual rental of $33,000.00 plus a common area charge which the lease estimated to be in the amount of $2.50 per square foot plus G.S.T. for 2005, and called on the landlord to provide annual common area charge information to the tenants. In the first renewal the rental increased to $34,650.00 per year and $36,300.00 for the second year, in the second renewal upped the rent to $37,950.00 for each of the two years.
[ 5 ] On or about September 1, 2010 the applicant tenant received a notice from the respondent landlords that it owed $14,533.00 as its proportionate share (based on square footage) of the $76,125.00 amount paid by the landlord to have the entire parking lot totally repaved. The applicant and the other tenants had received no prior notice whatsoever of this repaving.
[ 6 ] The common expense information for 2009 as provided by the landlords to the tenant indicated that the total common expenses for 2009 were in the amount of $10,549.00, and the notice from the landlord with respect to common expenses for 2010 indicated that total common expenses were $15,955.90.
[ 7 ] The asphalt parking lot was initially installed in 1991, some 12 or 13 years prior to the commencement of the applicant’s tenancy.
[ 8 ] The notice from the landlord to the applicant in respect of the repaving expense did not purport to add this amount to the monthly common expense amount that the tenant would have to pay, nor did it seek to in any way amortize the cost over the life expectancy of the newly paved lot. It purported to be a onetime charge. Other information on the application indicates that at the request of some of the other tenants arrangements were made to spread the cost of their shares over periods of time, the longest of which was 18 months. This was not done by way of amortizing the cost, but rather by way of agreeing to payment of the tenant’s proportionate share over a period of time.
[ 9 ] On cross-examination the respondent Anna Sbrissa testified to an expectation that the new pavement would last for 20 years.
[ 10 ] The applicant vacated the premises as of October 31, 2011, being the end of the second renewal. The applicant has not paid anything towards the cost of the paving.
[ 11 ] The applicant relies upon Riocan Holdings Inc. v. Metro Ontario Real Estate Limited, 2012 ONSC 1819 as authority for the proposition that the rebuilding of a commercial parking lot is a capital expense and accordingly not recoverable as part of a monthly expense from the tenant. In that case the lease provided that the tenant would pay a proportionate share of common expenses which included repairs and maintenance to various items, expressly including “paved areas”. The weakness in the applicant’s argument is that lease went on to provide that those monthly common expense costs did not include “expenditures which by accepted accounting practice are of a capital nature”. There Justice Morawetz found the paving work to be an expense of a capital nature according to accepted accounting principles, and hence that the tenant was not responsible. Because of that difference in the wording of the lease in that case, as opposed to this one, it may not be dispositive. It is helpful in any event in that on my reading it indicates that the case law is not “black and white” in this area, and secondly, that a common sense approach ought to be applied.
[ 12 ] I turn now to examine what appear to be relevant portions of the lease in question. Unhelpfully, neither the paragraphs nor the pages of the lease are numbered.
[ 13 ] On page 17 of the application record the lease provides that the “lessee will repair according to notice in writing (reasonable wear and tear, and damage by fire, lightening and tempest only excepted)”.
[ 14 ] At page 20 of the record the lease provides that:
“The parties hereto agree that this lease shall be a net/net lease in that the parties have agreed that this lease is a completely care-free net lease to the lessor. For greater clarity, the lessee hereby covenants and agrees that he shall be responsible for all expenses of any nature and kind with respect to the premises rented by it and further shall pay its proportionate share of all expenses arising from the lessor’s operation of the building in which the demised premises are located, including without limiting the generality of the foregoing, all expenses arising from utilities, realty taxes, local improvement charges, insurance, repairs, and common area maintenance expenses, which proportionate share shall be calculated on a pro-rata basis calculated by taking into account the square footage rented by the lessee herein, as a proportion of the rentable premises located at 115 Hempstead Drive, Hamilton, Ontario. Provided however that the lessor shall be responsible for their own income taxes.”
[ 15 ] The lease continues that “the lessee agrees that it shall pay to the lessors additional rent as follows:
“(a) The lessee shall additionally pay monthly a proportionate shall of all costs and expenses incurred by the landlord in maintaining, operating, cleaning, insuring, and repairing the property and without limiting the generality of the aforesaid, such costs and expenses shall include the cost of:”
And then follows four enumerated items irrelevant to this case.
[ 16 ] Here the applicant tenant received no notice to repair the parking lot. The first indication it received concerning this issue was the notice advising that the landlord had already had the parking lot repaved and was looking to recover from the tenant its proportionate share.
[ 17 ] There is no doubt that the parking lot in question is a common area. It seems to me that the issue comes down to whether the total repaving of the parking lot can fairly be found to constitute “maintenance” or “repair (reasonable wear and tear…excepted)”.
[ 18 ] Undoubtedly in arrangements of this type there will be a myriad of items which must be replaced in the normal course of events and yet which replacement can reasonably classified as an item of maintenance – for example a light bulb, or an air filter in a heating or air conditioning system. It seems to me that other items, however, are so substantial in their nature and in their expense that they cannot reasonably be considered as an item of repair or maintenance.
[ 19 ] The replaced parking lot was between 19 and 20 years old and the evidence is that it required repairs of sufficient extent that it was recommended to the landlord that the better course of action was to simply replace it. The evidence of the landlord is that it is expected that the new parking lot will last some 20 years. I think it reasonable to infer that in the climate of this country paved parking areas do not last indefinitely. The only two items of evidence I have that are relevant, the landlords evidence, and the history of the original pavement, would suggest that the reasonable life expectancy is some 19 to 20 years.
[ 20 ] In my opinion it is implicit in the position of the respondent landlords that they recognize this was not a common item of repair or expense in that they billed the applicant for its proportionate share of the total amount, not as a monthly expense item, but as a one time lump sum.
[ 21 ] The term of the lease requires that the applicant be responsible for the repair of items but reasonable wear and tear is expressly excepted. On the evidence before me it appears that the landlord accepted the advice it had received to the effect that the wear and tear over 19 or 20 years on the original paved parking lot was such that it required to be replaced rather than repaired. The applicant is not responsible for the cost of repairing conditions that are the result of reasonable wear and tear.
[ 22 ] Nor in my opinion does the total replacement of this pavement reasonably fall within the term “maintenance”. I have regard to the definitions of that term as found in both The Oxford English Dictionary, and in Black’s Law Dictionary, both of which are provided in the respondents book of authorities. Common to both is the concept of “keeping the property up”. This parking lot pavement wasn’t “kept up”. It was totally replaced.
[ 23 ] For these reasons, I interpret the lease as providing that the total cost of replacing the entire parking lot is beyond what was contemplated in the tenants’ obligation to pay on a monthly pro-rata basis for “repairs (reasonable wear and tear excepted)” or “maintenance” of the common areas. Accordingly I find the applicant tenant is not liable for the repaving costs attributed to it.
[ 24 ] If on review I am found to be in error with respect to that conclusion, I will add briefly that it would otherwise be my view that reason and common sense would require that this tenant’s proportionate share of the paving cost ought to be amortized over a period of 20 years, being the landlord’s evidence as to longevity, with the resulting figure then being divided by 12 to create a monthly figure to be added to the monthly charge, and that the tenant would be liable only for that amount for the months between September of 2010 when the notice of paving charges was given, and October, 2011 when the lease expired.
[ 25 ] To require this tenant to be responsible for its proportionate share of the entire repaving cost, when the paving job has a life expectancy of 20 years, and the tenant has only 14 months left on its lease is unfair and unjust.
[ 26 ] The landlord also claims from the tenant the sum of $2,450.00 for a replacement door on the tenant’s premises. This is a vehicle door and appears from the photographs filed to be well dented. The affidavit evidence of the owner of the applicant company is that this damage was present when the tenant took occupancy, that it remained throughout, and that the damaged door continued to operate properly throughout the tenancy and was still operating properly at its end. He was not cross-examined on that position.
[ 27 ] Anna Sbrissa simply indicates “the applicant’s use of the units resulted in damage to the doors”. It does not directly allege that the door was damage free prior to the tenant taking possession. This issue really does not require or rest on an interpretation of the lease. It is a matter of fact. As such it may well be beyond the scope of this application, and should perhaps properly be the subject matter of a Small Claims Court trial. The amount in issue renders that course of action impractical. The parties have argued it. In my opinion the evidence of the applicant tenant is stronger in that there is a direct assertion that the damage was pre-existing the tenancy. The wording of the landlord’s affidavit is more in the nature of an assumption that the tenant must have caused the damage because it was there when the tenancy was over. I prefer the evidence of the tenant and I find the tenant is not liable to pay for those repairs or replacement for that damage.
[ 28 ] An additional dispute has arisen between the parties concerning “last month’s rent”. It appears to be common ground the tenant paid first and last month’s rent at the outset of the lease, but then also provided an additional post-dated cheque for last month’s rent as part of the series of monthly cheques for the last year of the lease. Clearly he does not have to pay twice. The tenant put a stop payment on the last monthly cheque whereupon apparently the landlord engaged the services of a Bailiff who went there but did not distrain any property. The tenant, on learning of the landlord’s concern, replaced the cheque for last month’s rent.
[ 29 ] During argument before me counsel agreed they would be able to work out as between themselves the issue of last month’s rent. In my opinion the tenant should not be responsible for the costs incurred by the landlord with respect to the Bailiff when no action was actually taken.
[ 30 ] For these reasons I would allow the application and determine that the applicant tenant is not responsible for any portion of the costs of repaving the parking lot, nor for the cost of replacing the door, nor for the Bailiff’s fee.
[ 31 ] As to costs, given the amounts in issue, it is very much to be hoped and expected that counsel will be able to resolve the issue of costs as between themselves. In the event they cannot, written submissions as to costs may be forwarded to me at judge’s chambers, 6 th floor, at the Hamilton Courthouse, 45 Main Street East, Hamilton, Ontario. Those of the applicant are to be received within 21 days of the release of these reasons with those of the respondent to be received within 21 days after receipt of those from the applicant. The submissions by either party should not exceed five (5) pages in length, exclusive of the bills of costs and supporting documentation. In the event that the costs submissions are not received within those timelines, or any extension as I may grant upon application, the issue of costs will be deemed to have been settled as between the parties and no order of costs will be made.
GLITHERO J.
Released: October 29, 2012
COURT FILE NO.: 11-30960
DATE: 2012-10-29
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Parsons Precast Inc. Applicant
- and –
Anna Sbrissa and Armando Sbrissa Respondents
REASONS FOR JUDGMENT
Glithero J.
CSG:mg
Released: October 29, 2012