SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-13-3873-00

DATE: 20131025

RE: Inderpal Singh (Applicant)

v.

202289 Ontario Inc. (Respondent)

BEFORE: Seppi J.

COUNSEL: H. S. Dhaliwal, counsel for the applicant

A. Vishwanths, counsel for the respondent

ENDORSEMENT

[1] This is an application for the determination of rights that depend on the interpretation of a commercial lease contract, pursuant to Rule 14.05 (3)(d) of the Rules of Civil Procedure, R.R.O. 1990, O. Reg. 194; and for a declaration pursuant to Rule 14.05(3)(g), that the applicant has validly exercised an option to renew under the lease.

[2] On October 8, 2008, the applicant, Inderpal Singh as lessee, and the principal of the respondent landlord lessor, Parwinder Gill, entered into a commercial lease agreement (“lease”) in respect of premised at 2260 Bovaird Drive, Unit 103, Room 1, in Brampton, Ontario (“premises”). Mr. Singh has operated as a paralegal in those premises since 2006, initially with a partner, and as of October 2008 on his own.

[3] The relevant terms of the lease are as follows:

1. Under “basic terms” on the first page it states:

Term: Five (5) plus Five (5) Years.

2. On the second page it further states:

1. Term:

A. Landlord hereby leases the Leased Premises to Tenants, and Tenants hereby leases the same from Landlord, for an Initial “Term” of beginning October 01, 2008 and ending September 30, 2013 … the Tenant and Landlord will negotiate to renew this Lease for further five years after the expiration of initial lease.

3. A further relevant term states:

The Tenant has an option to renew the Lease for further five years subject to increase 6% increase in the rent and additional rent.

Issues

[4] The Issues are as follows:

1. Whether the applicant clearly communicated his intention to exercise the option to renew the lease for a second five year term;

2. (a) whether there were conditions precedent to the applicant’s right to exercise his option; and, if so,

(b) whether he was in breach of such conditions, thereby disentitling him to the right to exercise the option; and

3. Whether the applicant was in default under the lease, thereby disentitling him to the right to exercise the option?

[5] There is no dispute on the relevant law by which the onus is on the applicant to show the exercise of an option to renew was done in a manner which is clear, explicit, unambiguous and unequivocal. On the evidence, he verbally notified Mr. Gill in early August 2013 that he wanted to renew the lease. Thereafter, his former lawyer informed the landlord by letter dated August 8, 2013 that the applicant wanted “to renew the lease for further Five (5) years terms as per paragraph 2 (a) of [the] commercial lease agreement,” stating further that if my client does not receive a response in 20 days he shall consider it automatic renewal of the lease.

[6] The lawyer’s letter goes on to press the issue of potential legal proceedings in the event of a refusal to renew. The applicant’s evidence is that this comment was added due to the respondent telling him he wanted to lease the subject premises to another paralegal.

[7] The response from the respondent’s lawyer, a letter dated August 20, 2013, was to request the applicant vacate the premises and deliver vacant possession of the premises before October 1, 2013. The letter states, inter alia, “My client intends to use the said premises for his own use, and therefore, will not be renewing the said lease.” It also alleges unspecified continued default under the terms of the lease.

[8] The letter in response from the applicant’s new lawyer repeats the exercise of his option to renew for a further five year term and encloses 12 post-dated rent cheques in an amount adding 6% to the existing rent. The applicant personally further confirmed the wish to renew in his letter to Mr. Gill of the same date.

[9] The respondent argues the 6% rent increase and phrase in the above-clause stating the parties “will negotiate to renew” form condition precedents to the exercise of the option. He claims the applicant’s failure to fulfill these pre-conditions render the option to renew invalid. He also submits the exercise of the option was not communicated in a clear and unambiguous manner. He states the applicant is in breach of his covenants to annually increase the rent by 6% and insure are defaults, which also invalidate the option to renew.

[10] The argument that the option was not exercised in a clear and unambiguous manner relies on the fact that the applicant’s former lawyer’s letter threatened legal enforcement of the right. This argument does not succeed. The statement of the applicant’s wish to exercise his five year renewal option was clear, explicit and unambiguous and unequivocal. The expression of an intended legal enforcement of the right to the option does not make it less so.

[11] I also reject the argument that the term “the parties will negotiate to renew” denotes a condition precedent to the applicant’s right to exercise the option under the lease. There is no provision in the agreement requiring negotiations before the exercise of the option to renew. The option for five year renewal is there for the tenant “subject to 6% increase in the rent and additional rent.” Considering the lease agreement as a whole, this term is referable to negotiations in the context of the option to renew having been exercised. Once exercised it is to be followed by a negotiation of the 6% increase and additional rent. Logically and for business of efficacy, this is to occur after the notice of an intention to renew has been given. When the respondent received the letter indicating the applicant wanted to exercise his option to renew, he did not negotiate. Instead he issued a refusal to renew and a demand to vacate.

[12] The term of the lease making the renewal subject to a 6% increase in rent has been acceded to by the applicant. It is apparent in all the circumstances that he provided the rent cheques with the 6% increase in compliance with this term, and as a good faith negotiation of the increase. There has been no request or negotiation of “additional rent” by the respondent. The failure on the part of the respondent to negotiate does not invalidate the applicant’s right to exercise his option. The term requiring a negotiation is not a condition precedent to the right of the applicant to exercise his option to renew. In the absence of a negotiation for additional rent, after he clearly made his wish known, the applicant is entitled to renew on the basis of the 6% percent increase for a further five year term.

[13] The defaults which have been raised in this application in regard to the third issue are:

1. that the applicant did not pay the stipulated 6% increase after October 2010;

2. that the applicant has not compiled with the lease terms of the requiring the provision of insurance; and,

3. that the applicant has violated a term of the clause respecting use of the premises by keeping the doors unlocked at hours which are not permitted.

[14] The third default was not pressed in argument and is not supported by any reliable evidence.

[15] On the first alleged default, I find the respondent has waived the increase as of October 2010. He admits to the waiver in his affidavit when he states “one reason the respondent did not take any action regarding the applicant’s breach was because the breach occurred mid-lease, and the respondent wanted the lease term to end without event.”

[16] The applicant’s evidence about this alleged breach is that the annual 6% increase was waived by the landlord as of October 2010, in consideration of his displaying advertisements for other tenants. Whatever the reason, the undisputed course of conduct whereby the rent was paid without the 6% annual increase, and was accepted without complaint by the respondent over the past three years clearly supports a waiver by conduct of the annual increase on the part of the landlord. This waiver was relied upon by the tenant. The landlord’s argument, now three years later, alleging default on account of the applicant’s reliance on his waiver of the rent increase does not succeed. It is not a ground upon which the applicant is found to be in default under the Lease. The respondent is not entitled to now raise the issue as an obstacle to the applicant’s right under the option to renew.

[17] The second default alleged is also without merit. There is evidence of insurance filed by the applicant’s certificate of insurance. There is no default on the part of the applicant under the terms of the lease which disentitle him to exercise the option to renew.

Result

[18] In the result, therefore, there shall be an order that the applicant is entitled to the exercise of his option to renew the Lease for a further five year term, and a declaration that the applicant has validly exercised his option to renew. An order shall issue accordingly.

[19] In the event the parties are unable to agree on a disposition of costs, each may submit written submissions, including a costs outline, and copies of any applicable offers to settle by no later than November 30, 2013. The costs submissions shall be delivered to the Judges’ chambers in the Brampton courthouse.

Seppi J.

DATE: October 25, 2013

COURT FILE NO.: CV-13-3873-00

DATE: 20131025

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Inderpal Singh (Applicant)

v.

202289 Ontario Inc. (Respondent)

BEFORE: Seppi J.

COUNSEL: H. S. Dhaliwal, counsel for the applicant

A.Vishwanths, counsel for the respondent

ENDORSEMENT

Seppi J.

DATE: October 25, 2013