2516513 Ontario Inc. v. York Region Condominium Corporation No. 886, 2019 ONSC 5215
2019 ONSC 5215
COURT FILE NO.: CV-19-00613740-0000 COURT FILE NO.: CV-19-00619853-0000
DATE: 20190910
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2516513 Ontario Inc.
Applicant
– and –
York Region Condominium Corporation No. 886
Respondent
Micheal Simaan and Michaela Chen, for the Applicant (Respondent in Court File No. CV-19-619853)
Rodrigue Escayola, for the Respondent (Applicant in Court File No. CV-19-619853)
HEARD: June 7, 2019
Kimmel J.
REASONS FOR DECISION
[1] These two applications seek to resolve a parkade lease dispute at a commercial condominium shopping complex in Markham. The shopping complex is owned by York Region Condominium Corporation No. 886 (the “Condominium Corporation”). 2516513 Ontario Inc. (“251”) is the current owner of 271 parking units in a two-level above ground parkade that is used by patrons of the shopping complex. 251 purchased those parking units in 2016, together with some retail condominium units, for approximately $8.5 million. At that time, 251 became the landlord under a lease dated July 23, 2010 (the “2010 Lease”) that granted the Condominium Corporation (tenant) the right to use 250 of the parking units in the parkade.
[2] The central question is whether the parties entered into a valid and enforceable rental agreement following the expiry of the existing lease term on July 31, 2017. If not, then I must determine the status of the 2010 Lease and whether there are rent arrears owing. I must also determine whether the Condominium Corporation is entitled to terminate the 2010 Lease, or if the Condominium Corporation is required under its site plan, Declaration and the by-laws of the City of Markham to continue to lease the parking units, and whether they impose a reciprocal obligation on 251 to continue to make the parking units available.
[3] For the reasons that follow, I find that the tenant is overholding under the 2010 Lease and is required to pay rental arrears to make up any difference between the monthly amounts payable under the 2010 Lease and what it has actually paid, which may be set off against any substantiated arrears of common expenses owing to the Condominium Corporation by 251. Any interim understandings or agreements that the parties reached during their negotiations in 2017 and 2018 concerning reduced lease payments required steps to be taken by both parties in furtherance of by-law amendments to and/or rezoning of parking requirements. Those steps were not taken, no applications have been made for by-law amendments or rezoning and any interim agreements or understandings were breached by both parties and are now unenforceable.
[4] I am not prepared to make a mandatory order that the landlord seeks, requiring the tenant to enter into a new lease term or to effectively require the tenant to continue under the 2010 Lease as an overholding tenant in perpetuity. Such an order is not warranted and would be contrary to public policy. If the parties are not able to reach an agreement on their own concerning new lease terms, then the 2010 Lease provides that either party may terminate the overholding tenancy under the 2010 Lease on one month’s written notice.
[5] The overholding under the 2010 Lease is what presently gives the Condominium Corporation rights in relation to the parking units owned by 251. If the overholding is terminated, any implications that may have for the Condominium Corporation’s ability to remain in compliance with its site plan, Declaration and/or municipal by-laws will be a matter to be addressed in another forum. The municipality has not participated in these applications and I am not prepared to make any order concerning by-law or site plan compliance, or non-compliance, in its absence.
Background - The Parking Structure Leases
[6] The original developer of this retail condominium, Kingsberg Far East Limited was required by the then Town of Markham to construct and maintain a parking structure (parkade) under its site plan control agreement dated July 17, 1996. The Markham municipal by-law 207-95 in effect at the time, and still in effect, specifies the number of parking spaces that the developer and now the Condominium Corporation must maintain and provide for the use of patrons, and imposes certain requirements about where they are to be located.
[7] The developer/declarant made a declaration dated June 17, 1997 under the Condominium Act 1998, S.O. 1998 c. 19, concerning the 146 commercial units, 6 storage units and 281 parking units that had been constructed. Section 5.4 of this declaration stated that:
The Condominium Corporation shall at the time of registration of this Declaration, lease from the Declarant any available registered parking spaces on Levels 2 and 3 to create additional customer and visitor’s parking on the terms and conditions to be negotiated between the Condominium Corporation and the Declarant from time to time. In the event no renewal term can be resolved between the parties when any existing lease expires, then the existing lease between the parties shall be deemed to continue until such time as the matter is resolved between the parties.
The expense associated with the leasing of any parking spaces by the Condominium Corporation shall be included as part of the Condominium Corporation’s common expenses.
The Declarant shall at all times be under obligation to make available for lease to the Condominium Corporation, on reasonable business terms, sufficient parking spaces to enable the Condominium Corporation to be in compliance at all times with municipal by-law requirements applicable to the Condominium Plan.
[8] When the Condominium Corporation took over responsibility for the condominium from the developer, the parking structure became part of the common elements of the condominium that the Condominium Corporation is responsible for maintaining. The developer retained ownership of the individual condominium parking units located in the parking structure. This meant that the Condominium Corporation had to lease the requisite number of parking units in the parking structure from the developer, and it did so pursuant to a lease dated July 21, 1997 that had a twenty-year term expiring on July 31, 2017. There was no express right of renewal under the July 1997 lease, but it did contain an overholding clause 6(h) that provided that:
(h) Overholding
It is hereby agreed that if the Tenant occupies the demised premises after the expiration of this Lease or any renewal thereof without any further written agreement and the Landlord accepts rent for the demised premises, the Tenant shall be a monthly tenant only (terminable on one month’s notice) at the same rent payable during the month immediately preceding the expiration or termination of this Lease and otherwise as far as applicable to a monthly tenancy, upon the same covenants, provisos and conditions as contained in this Lease.
[9] When the developer sold the parking units in the parkade to a third party (Vararoho Developments Inc.), the July 1997 lease was surrendered and terminated, and the Condominium Corporation entered into a new lease dated July 23, 2010 with the new owner for a term that still expired on July 31, 2017. This 2010 Lease contained many of the same terms as the July 1997 lease, including proviso 6(h) for overholding. It also contained an express option to the tenant (the Condominium Corporation) to extend for one further 10-year term, on 12 months written notice pursuant to s. 13 thereof.
[10] 251 has owned retail units in the condominium development for several years, and the principal of 251 was on the Condominium Corporation’s board of directors and is one of the signatories of the 2010 Lease for the Condominium Corporation. The May 5, 2016 purchase agreement between 251 and Vararoho for the 271 parking and other retail units contemplated that the existing leases would be assigned to, and assumed by 251, including the 2010 Lease of the parking units.
Parkade Lease Arrangements Post- July 2017 - Positions of the Parties
[11] Neither party disputes that the parkade lease arrangements between them were governed by the 2010 Lease until the expiry of its term on July 31, 2017. It is also common ground that the Condominium Corporation did not provide any written notice prior to July 31, 2017 to exercise its option to extend the term of the 2010 Lease for a further ten years.
[12] No new formal lease has ever been signed. The parties discussed and negotiated various lease terms and other arrangements commencing in or about June of 2017. Some lease payments have been made since July 31, 2017, initially continuing at the 2010 Lease rates but later at reduced rates.
[13] The Condominium Corporation maintains that the parties entered into a handwritten agreement on March 8, 2018 to reduce the monthly lease amounts to $5,000 per parking unit on the first level of the parkade as of April 1, 2018, and to terminate all parking unit rentals on the second level of the parkade as at March 31, 2018, and asks the court to enforce that agreement.[^1] Although not always kept current, it is my understanding that, as of the hearing date, the Condominium Corporation had brought into good standing its monthly rent payable under the 2010 Lease up to April 1, 2018 and the reduced monthly payment of $5,000 for the first level parkade spaces from and after that date. The parties assured me that they have records of what has been paid and that they are not looking to the court to determine that, but they will take it into account in implementing any order I make.
[14] 251 maintains that the March 8, 2018 document was simply confirmation of an agreement in principle, or proposed agreement, that the parties had reached in November of 2017 that was conditional upon certain zoning amendments (to reduce the parking by-law requirements applicable to the Condominium Corporation and to allow for self-storage in any parking units that the Condominium Corporation is no longer required to maintain and make available to customers and visitors to the shopping complex). 251 maintains that there was no agreement, or that any agreement was subject to a condition precedent of zoning amendments, without which the March 8, 2010 handwritten agreement never became effective, leaving the overholding provisions under the 2010 Lease to govern the relationship between the parties after July 31, 2017. Initially, 251 contended that the overholding was on an annual basis but it conceded during argument that s. 6(h) of the 2010 Lease expressly provides for a month to month tenancy in an overholding scenario.
[15] 251 is also seeking various declaratory relief concerning the Condominium Corporation’s obligations under its site plan, Declaration and the municipal by-laws that 251 says require the Condominium Corporation to continue to lease 251’s parking units in the parkade on fair market rental terms (to be determined at a later date if not agreed). The Condominium Corporation argued in its written submissions that it satisfied any such obligations by entering into the original 1997 lease with the developer, but conceded in oral argument that even if the original lease satisfied its obligations under the Declaration, it does not satisfy its ongoing obligation under by-law 207-95 to provide and maintain the requisite number of parking spaces. It maintains, however, that it can choose not to comply with that by-law and suffer any consequences of its failure to do so that the City of Markham may seek to impose, but that the prospect of such does not translate into an obligation to enter into a lease with 251.
Issues to be Decided
[16] These applications raise the following issues that I must decide:
a. Is the March 8, 2018 handwritten agreement a binding and enforceable agreement between the parties?
i. Was it duly authorized and signed?
ii. What is its relationship to the agreement in principle reached at the November 22, 2017 meeting of the Condominium Corporation’s board of directors?
iii. Are its terms certain?
iv. Was it subject to covenants of the parties that were not fulfilled and have those breaches rendered it invalid or unenforceable?
b. What is the status of the 2010 Lease?
i. Has it been terminated or expired?[^2]
ii. Is the 2010 Lease continuing pursuant to the overholding provisions in s. 6(h)?
iii. Are there arrears owing by the Condominium Corporation under the 2010 Lease?
iv. Is interest payable on any arrears? At what rate?
v. Is the Condominium Corporation entitled to set off outstanding common expenses owing by 251 from any rent arrears found owing?
c. Is the Condominium Corporation required to continue to lease the parking units from 251 to be in a position to provide and maintain the requisite number of parking spaces for the use of all customers and visitors to the shopping complex, and is 251 required to make those parking spaces available for lease to the Condominium Corporation, or can the tenancy under the 2010 Lease be terminated? (e.g., what effect, if any, do the site plan, Declaration, and/or municipal by-law requirements for parking have on the lease arrangements between the parties?)
Analysis
The March 8, 2018 Handwritten Agreement
[17] The March 8, 2018 handwritten agreement begins with the word “Agreement” and reads as follows:
This agreement made between YRCC 886 and the landlord of the parking structure at YRCC 886. Both parties agree to the following terms for the rental of the two levels of parking known as P1 and P2:
Terms:
As of April 1^st^ 2018 P1 will be rented by YRCC 886 for $5000 + HST per month.
P2 Rental will be terminated as of March 31, 2018.
YRCC 886 [will] fully support all City of Markham applications to change P2 into a Public Storage unit.
YRCC 886 to complete Parking Utilization Study to support zoning application.
[Struck out]
P1 Rental does not include rental of parking spots rented to car wash and Excellence health Club and Dr Chow.Schedule A to be attached with exact parking space diagram for rental spaces on P1.
YRCC 886 will fully support and help solicitate for any bylaw or Declaration amendments required to proceed with zoning amendment application to change P2 into a self storage unit.
(i) Did 251 duly authorize and sign the handwritten agreement?
[18] The March 8, 2018 handwritten agreement was signed or initialled by the members of the board of directors of YRCC 886 (some of whose signatures/initials appear above the signature line for YRCC 886 and others span across the page). Aston Shuen, the son of Piera Ip (who is the principal and sole officer and director of 251), was a member of the board of directors. His signature alone appears above the signature line for 251, with the initials of some other board members spanning across the page above his signature.
[19] Ip says she is the authorized representative of 251, and her son is not. She attests in her affidavit that she understood this handwritten agreement to be a proposal among the board members to reduce the number of parking spaces rented by the Condominium Corporation if P2 could be converted into a storage area. In the same paragraph of her affidavit (20), she admits to having been present during the discussion about the agreement and to having witnessed it being written. However, she denies that this handwritten agreement constitutes a new rental agreement or lease and maintains that she did not understand it to be a binding legal document having not signed it herself and having not authorized her son to sign on behalf of 251. She claims her son was signing as a Condominium Corporation board member only. Shuen did not file his own affidavit on the application.
[20] The Condominium Corporation’s account of the signing of this document is different. Its representative, Shan Liu, attests that the handwritten agreement was written up and reviewed by Ip, who in turn asked her son Shuen to review it, following which she indicated to him that he could sign it, and he did so in front of all present at the meeting on March 8, 2018. The Condominium Corporation maintains that Shuen did not have authority to sign as a board member because he was conflicted in these arrangements, and that its representatives understood that Shuen did have the authority from his mother to sign for 251, noting he signed directly above the signature line for 251.
[21] The question of whether Shuen had actual authority to sign the handwritten agreement on behalf of 251 may have been a factual issue in dispute that I would find requires a trial to resolve, and might have led me to convert this application into an action (as I would have the discretion to do under Rule 14.05(3)(h)), but the question of Shuen’s actual authority does not need to be decided.
[22] I agree with the submissions of the Condominium Corporation that the record supports the invocation of the indoor management rule under s. 19 of the Business Corporations Act, R.S.O. 1990 c. B.16. The Condominium Corporation has established on a balance of probabilities - based on Ip’s own evidence and her behaviour at the meeting in allowing Shuen to sign the agreement in front of her after they both had been present while it was written and she had asked Shuen to review it, and based on the unchallenged evidence of the board members about their understanding of Shuen’s authority - that Shuen had apparent authority to bind 251 to the March 8, 2018 handwritten agreement. See 1414391 Ontario Ltd. v. George Graff, 2017 ONSC 2378, at para. 42.
[23] However, the question remains as to whether the March 8, 2018 handwritten agreement is otherwise valid and enforceable by the Condominium Corporation.
(ii) Factual Matrix – the November 22, 2017 meetings and follow-up
[24] The contractual analysis requires some further context that is provided by the minutes of the two meetings of the Condominium Corporation’s board of directors that preceded the March 8, 2018:
a. At the November 22, 2017 board meeting the minutes record that the board and Ip all agreed to try to get a parking study done to review the feasibility of changing P2 into a storage area, and that the landlord agreed to endorse a rezoning submission by YRCC886 to reduce parking requirements and to rent P1 for $5000 per month, and in return YRCC886 will endorse and support the amendment to the Declaration and any zoning changes for changing P2 into a public storage. The board approved a parking utilization study to be done by Gowling WLG.
b. At the January 17, 2018 board meeting the minutes record that the parking utilization study was underway and was expected to be delivered in March.
[25] The agreement that the parties reached as recorded in the November 22, 2017 board minutes clearly contemplates two different rezoning applications: one by the Condominium Corporation to change the parking zoning and requirements for the complex/plaza and the other by the landlord (251) to change the zoning on level P2 to allow for self-storage. Based on a TMIG Phase 1 parking utilization study contained in a memorandum dated March 29, 2018 and a Gowling WLG April 25, 2018 letter both received subsequent to and in furtherance of the November 22, 2018 agreement, the second contemplated application by the landlord was clearly understood to be dependent upon the first application by the Condominium Corporation having succeeded.
[26] The November 2017 agreement must be considered as part of the factual matrix of the March 8, 2018 handwritten agreement. Various authorities on contract interpretation were cited to me by counsel for the Condominium Corporation. They all essentially say what the Supreme Court of Canada so conveniently summarized in Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47. I am guided by these principles:
a. The overriding concern is to determine the intent of the parties and the scope of their understanding.
b. The contract must be read as a whole, giving the words their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.
c. In a commercial contract, the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, and the market in which the parties are operating.
[27] Reading the March 8, 2018 handwritten agreement in the context of the earlier November 22, 2017 agreement to commission a parking utilization study to support the two contemplated rezoning applications, its apparent commercial purpose was to implement the revised lease terms (reducing the number of parking spaces to be rented and the monthly rental amount to be paid by the Condominium Corporation) while these rezoning applications proceeded, and in anticipation of them succeeding.
(iii) Certainty of the term and subject matter of the handwritten agreement
[28] The March 8, 2018 handwritten agreement has no specified term and is missing the schedule intended to be attached to it. 251 took the position early on that this handwritten agreement was invalid for its failure to include the requisite terms of a valid agreement to lease, such as an ascertainable term and a description of the premises to be demised, relying on the case of Canada Square Corp. et al v. Versa Food Services Ltd. et al (1981), 1981 CanLII 1893 (ON CA), 34 O.R. (2d) 250, 130 D.L.R. (3d) 205, at p.14 (C.A.). The Condominium Corporation acknowledges that the term must be certain, but contends that the certainty of duration can be ascertained either by reference to the express terms of the lease or by reference to some collateral matter that is itself certain or capable of being made certain after the lease takes effect. See Holt v. Thunder Bay (City of), 2003 CanLII 38649 (ON CA), 65 O.R. (3d) 257, at para. 19 (C.A.). I find, in the absence of an express term as to the duration of the March 8, 2018 handwritten agreement and having regard to the preceding (collateral) November 22, 2017 agreement that it builds upon, that it must be read as an interim agreement to amend the amounts payable under the 2010 Lease pending the rezoning applications.
[29] The other concern about this handwritten agreement is that the Schedule “A” to be attached which was to identify the exact parking spaces to be rented was never prepared or attached. While it is trite that there is a need for certainty of the subject matter of any contract for it to be validly constituted and enforceable, the evidence of the Condominium Corporation’s representative was that the parking spots on P1 to be excluded (and which were to be delineated on Schedule “A”) were identified in a walk around on the same day it was signed and were known to the parties. This evidence has not been challenged or contradicted. Thus, the missing Schedule “A” is not fatal to the validity of the March 8, 2018 handwritten agreement.
(iv) Was the handwritten agreement breached?
[30] The March 8, 2018 handwritten agreement does not supplant, and must be read in conjunction with, the agreement recorded in the November 22, 2017 board minutes, which contemplated two applications for rezoning: One by YRCC 886 to reduce its parking requirements to just P1 and the other by the landlord (251) to change P2 into public storage.
[31] While the March 8, 2018 handwritten agreement only makes express reference to the intended application by the landlord to change P2 to self storage (confirming that the Condominium Corporation will support such application and any necessary amendments to the Declaration), it does not eliminate the need for the Condominium Corporation to first apply for rezoning to reduce its parking requirements to the use of spaces on only level P1. This approach is consistent with, and implied under, s. 4 of the March 8, 2018 handwritten agreement that requires YRCC 886 to “complete parking utilization study to support the zoning application.” That study would logically be to support a reduction in the Condominium Corporation’s parking requirements to coincide with available spaces on P1 or elsewhere in the hydro corridor.
[32] Any suggestion that the landlord agreed to take over the Condominium Corporation’s rezoning application regarding the parking requirements is not borne out on the evidence. Further, it does not make commercial sense that this important application that could have significant implications for the Condominium Corporation’s site plan, Declaration, and its obligations to the City would be ceded to 251 without some clear agreement and understanding expressly dealing with 251’s authority to do so. In the absence of any time having been specified, I find by inference that the Condominium Corporation was obligated to complete the parking utilization study and to make its rezoning application within a reasonable time after March 8, 2018.
[33] The reports generated for the Condominium Corporation after this are consistent with my finding that s. 4 of the handwritten agreement must be read in conjunction with the Condominium Corporation’s prior agreement not only to complete the parking utilization study but to apply for the rezoning that would be supported by it.
a. TMIG’s March 29, 2018 memorandum addressed to a planner at Gowling WLG records that TMIG was engaged to undertake a parking utilization study. A summary of the results of the parking demand surveys undertaken indicate that: “Although the existing parking supply can accommodate the demand (84% capacity), the second floor of the parkade is required to meet the parking demand of the commercial plaza. Without the second-floor parkade the parking lot would be operating at 117% capacity.” TMIG recommended as part of Phase 2 of its parking study that an additional parking demand survey be done including one that studied demands at later times.
b. The planner at Gowling WLG to whom the TMIG Phase 1 parking study memo was addressed provided an “opinion” dated April 25, 2018 concerning the parking supply obligations at the plaza, taking into account the supply of parking in the hydro corridor (50 spaces already provided for in the site-specific zoning of the property, and approximately 72 additional spaces that could be available in that corridor if approved by the municipality for use to meet the Condominium Corporation’s parking obligations based on demand).
[34] In summary, the Condominium Corporation’s obligations under the March 8, 2018 handwritten agreement were: (i) to pay the reduced rent; (ii) complete its parking utilization study in a timely manner; and (iii) to make the necessary application(s) to reduce its parking requirements. The Condominium Corporation began to pay the reduced rent to 251. In May of 2018, 251 disavowed the March 8, 2018 handwritten agreement and disputed the reduced rent payments. Since I have found the handwritten agreement to have been validly made, 251’s position at the time was, at the very least, an anticipatory breach of it. However, this did not relieve the Condominium Corporation of its obligations since it did not accept this repudiation and declare the agreement to be at an end.
[35] Instead of upholding its end of the bargain, the Condominium Corporation thereafter stopped paying rent for the parking spaces altogether in July of 2018.[^3] Although TMIG’s phase 1 study and the Gowling WLG April 2018 letter to the board were steps in the right direction, they were not enough to satisfy the Condominium Corporation’s obligation to complete the parking utilization study in a timely manner. There is no evidence that the Condominium Corporation implemented the recommended phase 2 of the parking utilization study in a timely manner or at all. While TMIG did provide an updated parking utilization study in a memorandum dated March 19, 2019, it appears to be focussed on accounting for the reduced parking demand attributable to the closure of the restaurant that had been occupied by certain retail units owned by 251. This 2019 TMIG memorandum does not purport to extend the parking survey period to 5 p.m. as the original TMIG study had recommended be done for phase 2, nor does it address the other steps recommended for the phase 2 study.
[36] Neither the original March 29, 2018 TMIG memorandum nor its updated March 19, 2019 memorandum satisfy the Condominium Corporation’s obligations under s. 4 of the March 8, 2018 handwritten agreement to complete the parking utilization study that would be needed to support zoning application(s). Nor is there any evidence of the Condominium Corporation having taken any steps in furtherance of the application for the zoning (or by-law) amendment to reduce its parking requirements to P1.
[37] Thus, while I have found that the parties did enter into the March 8, 2018 handwritten interim rental agreement, after it was disavowed by 251 the Condominium Corporation did not continue to act in accordance with it. The back payment of the agreed upon reduced rental amounts in March of 2019 by the Condominium Corporation did not cure its defaults.
[38] The Condominium Corporation comes to court asking for the March 8, 2018 handwritten agreement to be enforced, but I am not prepared to do so in the face of the Condominium Corporation’s own continuing defaults. I declare the March 8, 2018 handwritten agreement to be at an end and unenforceable due to the defaults of both parties.
(v) Other challenges to the validity of the handwritten agreement
[39] Considering my finding above, I do not need to address all the other arguments that were made by 251 against the validity and enforceability of the March 8, 2018 handwritten agreement. I will, however, briefly address the illegality argument since it predominated 251’s written and oral submissions. The crux of this argument is that the March 8, 2018 handwritten agreement must be capable of being legally performed for the Condominium Corporation to ask the court to enforce it. 251 argues that it is not capable of being legally performed because the reduction in the number of parking units rented by the Condominium Corporation would cause it to be in breach of its obligations to maintain and provide the requisite number of parking spots under its Declaration and the applicable by-law 207-95.
[40] In support of this position, 251 relies on the case of Still v. Minister of National Revenue, 1997 CanLII 6379 (FCA), [1997] F.C.J. No. 1622, [1998] 1 F.C. 549 (C.A.) and that court’s pronouncement of the principle underlying the common law doctrine of illegality (at para. 48) that:
Where a contract is expressly or impliedly prohibited by statute, a court may refuse to grant relief to a party when, in all the circumstances of the case, including regard to the objects and purposes of the statutory prohibition, it would be contrary to public policy, reflected in the relief claimed, to do so.
[41] 251 also refers to the case of Lifetime Learning Inc. v. Richmond Hill Country Club, [2000] 30 R.P.R. (3d) 85 (S.C.), at para. 199 for the point that “where a contract can be performed in two possible ways, one legal and the other not, the court will assume the parties intended it to be performed in the legal manner.” In that case, the court found that the parties’ agreement for the operation of a private school on certain lands could only be performed legally if the Town agreed to it and changed the zoning. The court found that their initial agreement was conditional on municipal approval and that they did not intend to proceed without the approval, so the agreement was not illegal even though the law precluded the municipality from granting the necessary approval absent rezoning. However, the parties later entered into a further addendum under which they agreed to move forward without the municipal approval which was neither sought or received, and that agreement was found to be unenforceable.
[42] In this case, there is no admissible evidence before me about whether the City of Markham would have granted rezoning approvals and amended the applicable by-law to allow the Condominium Corporation to reduce its parking requirements for the shopping complex, or to increase the permitted number of spaces to be used in the hydro corridor to satisfy its requirements. Passing comments by planners and/or in email correspondence about how the City of Markham would respond to any of the contemplated rezoning applications is not admissible to establish that the reduced parking requirements contemplated by the March 8, 2018 handwritten agreement could never be achieved.
[43] I do not agree with 251’s submission that, to avoid a finding of illegality, the March 8, 2018 handwritten agreement has to be read as subject to a condition precedent of municipal rezoning approvals. While a rezoning application is the classic type of “event beyond the control of the parties and which depends on the will of a third party” that may be the subject of a condition precedent (see THMR Development Inc. v. 1440254 Ontario Ltd., 2018 ONCA 954, at para. 15), the words of the handwritten agreement, even when read in the context of the factual matrix of the November 2017 agreement, do not support a finding that the coming into effect of the agreement was conditioned upon those approvals having been granted.
[44] I have interpreted the March 28, 2018 handwritten agreement in a manner that does not offend the public policy against illegal contracts. I have found it to have been an interim arrangement pending the outcome of intended rezoning applications that did not expressly foreclose the use of the other parking spots by customers of the shopping complex, many of whom were customers of 251’s restaurant tenant in any event. The March 8, 2018 handwritten agreement assumes that those re-zoning applications would be made.
The 2010 Lease
[45] The term of the 2010 Lease expired on July 31, 2017. The Condominium Corporation continued to have the use of the leased parking units from and after that date and paid for them for some time, until the events of 2018 and 2019 that gave rise to these applications.
[46] The Condominium Corporation initially took the position in correspondence dated July 11, 2018 that the March 8, 2018 handwritten agreement terminated the 2010 Lease. There is nothing in the March 8, 2018 handwritten agreement that indicates that the parties agreed to terminate the 2010 Lease and I find that it was not terminated. The Condominium Corporation later took the position in correspondence dated August 23, 2018 that this handwritten agreement amended certain terms of the 2010 Lease. I have found the March 8, 2018 handwritten agreement to be an interim agreement that would have modified certain terms of the 2010 Lease if it had been performed and not been breached.
[47] However, due to the breach of the March 8, 2018 handwritten agreement, the 2010 Lease has continued on a monthly basis since July 31, 2017 in an overholding situation, pursuant to s. 6(g). There is no evidence in the record before me that either party has given notice to the other to terminate the overholding under s. 6(g).
[48] Since March of 2018, it is my understanding that, after some payment delays between July of 2018 and March of 2019, the tenant has paid the monthly amount of $5,000. Section 6(g) of the 2010 Lease requires payment during the overholding tenure of same rent paid in the last month prior to the expiry of the term as well as compliance with other covenants, including the covenant to pay a proportionate share of the property taxes and HST in s. 4(b), which had also been paid by the tenant prior to the expiry of the term. The Condominium Corporation is required to pay these amounts throughout the overholding period and must pay the difference between these amounts owing and any amounts it has paid. According the landlord’s evidence, the monthly amount payable by the tenant under the 2010 Lease as at July of 2017 was $14,571.46. This amount includes rent, property taxes and HST.
[49] In its application, the Condominium Corporation seeks to set off against any amounts it owes against any outstanding common expenses owing by 251. It is not clear to me whether those have been paid or set off already, how they have been calculated or whether they remain in dispute. There is evidence that they were the subject of a lien claim. If there are outstanding common expenses owing by 251 and if the amounts owing are agreed or have been determined through the lien claim or some other process, they may be set-off against the amounts I have found to be owing by the Condominium Corporation under the 2010 Lease through the overholding period. However, if the common expense amounts are in dispute, the outstanding 2010 Lease payments should be made by the Condominium Corporation without set-off and should not be delayed pending resolution of that dispute.
The Site Plan, Declaration, and By-law Requirements
[50] I agree with the contention of the Condominium Corporation that the site plan, Declaration, and by-laws should not be read as requiring the Condominium Corporation to lease parking spaces in the parking structure in perpetuity. I find that, in the circumstances of this case, these documents do not dictate the lease arrangements between the parties.
[51] Section 50(3) of the Planning Act, R.S.O. 1990, c. P.13 does not permit any agreement that has the effect of granting the use of or right in land or by entitlement to renewal for a period of 21 years or more, except under certain circumstances that do not appear to apply in this case. If the site plan or development agreement supplants this restriction I would have expected to have heard argument and been directed to provisions in it to support this contention. I was not. The Condominium Corporation also relies on the case of Cheung v. York Region Condominium Corporation No. 759, 2017 ONCA 633, 139 O.R. (3d) 254, at para. 100 for the proposition that there cannot be a valid grant of a lease in perpetuity. I agree that it would be against public policy to read the site plan, Declaration, and by-laws in a way that would require the parties to offend that rule without some express statutory directive or exemption allowing them to do so.
[52] The parties in this case appear to have considered this rule against perpetuities to apply, in that the original lease term was for 20 years from August of 1997 to July 2017, and the term of the 2010 Lease was for a term of 7 years (expiring on July 31, 2017) with a 10-year renewal term for a total of potentially 17 years. As of the hearing of the applications, the 2010 Lease term had been extended to almost nine years.
[53] Section 5.4 of the Condominium Declaration obligates the Condominium Corporation to lease the parking spaces on terms to be negotiated from time to time and deems the existing lease to continue if a renewal term cannot be negotiated until the matter is resolved with a corresponding obligation on the developer/declarant to make the requisite number of parking spaces for by-law compliance available on reasonable business terms. However, to the extent this offends the rule against perpetuity it is not enforceable.
[54] The Condominium Corporation also argues that this provision of its Declaration is invalid in any event because it does not fall within the provisions of sub-sections 7(1) and (4) of the Condominium Act which are said to be exhaustive of the permitted provisions for inclusion in a declaration (see Loeb, A.M., Condominium Law and Administration, 2^nd^ Edition, chapter 3 paragraph 1 (b): Thomson Reuters, 2019). Any offending provisions must be deemed amended to conform or read out of the declaration. Diamond J., in the case of York Region Standard Condominium Corporation No. 1279 v. 1806780 Ontario Inc. and Liberty Development Corporation, 2017 ONSC 4507, at para. 15, aff’d at 2018 ONCA 1015, 299 A.C.W.S. (3d) 661, ruled that s. 7 of the Condominium Act permits a declaration to include matters mentioned not only in s. 7(1) and (4) but also mentioned in any other section of the Condominium Act and 251 argued before me that, on the authority of YRCC No. 1279, this would include rent to be paid by the Condominium Corporation for parking units as provided for under s. 72(6)(g) of that Act.
[55] At the hearing, various arguments were made about whether this section dealt with the Declaration or the disclosure statement, and whether that made a difference. In the end, I am not deciding the case on this point because I am not satisfied that the Condominium Act was fully canvassed for all potentially relevant sections that might save s. 5.4 of the Declaration and I am not prepared to make a finding that this section of the Declaration is invalid based on what is before me. However, for reasons already indicated, to the extent it purports to obligate the Condominium Corporation to enter into a lease in perpetuity for the parking spaces in the parkade, it is unenforceable.
[56] The Condominium Corporation remains obligated under municipal by-law 207-95 to provide and maintain the requisite number of parking spaces. This may require the Condominium Corporation to have some right of occupation or control over those parking spaces (see Toronto (City) Department of Buildings & Inspections v. Ramkumar, 38 O.A.C. 268, at paras. 5-7). How it goes about satisfying that obligation is not for me to decide. Its failure to do so may have legal consequences with the municipality, but that will be a matter for another day.
[57] The Condominium Corporation sought relief under the oppression remedy, s. 135 of the Condominium Act, as a means of relieving it from any obligation to continue to lease parking spaces from 251, which it considers to be oppressive and unfairly prejudicial. In light of my other findings, there is no need to grant relief under that section and I have not considered it or its implications in this context. It may be relevant in some future proceeding concerning the fairness of the rental terms going forward, but the parties have agreed that this is not an issue for me to decide at this time.
[58] I do need to address one other consequence of the position taken by the Condominium Corporation on these applications. It has contended that 251 is not privy to s. 5.4 of the Declaration, which only purported to create obligations between the Condominium Corporation and the developer/declarant that did not carry through to subsequent owners of the parkade and that 251 is thus not in a position to enforce it. Furthermore, 251 did not assume any direct responsibility to the Condominium Corporation or to the municipality under any site plan or development agreement to make sufficient parking spaces available to the Condominium Corporation to enable it to remain in compliance with municipal by-laws or other parking requirements.
[59] While not contractually obligated, having been on notice of the parking requirements imposed on the Condominium Corporation when it purchased the parking units, 251 might have had an obligation (perhaps enforceable under s.135 of the Condominium Act) to offer parking units for lease on reasonable terms in order to enable the Condominium Corporation to satisfy those requirements if the Condominium Corporation was seeking to comply with them. However, the Condominium Corporation is seeking the opposite in this case and specifically asks the court to declare that it has no obligation to remain in any parking lease arrangement with 251 regardless of the implications for it under the site plan, Declaration, municipal by-laws or otherwise. That position cuts both ways. To the extent that 251 might have otherwise had an obligation to make parking spaces available to the Condominium Corporation, it is relieved of such and may repurpose them so long as it remains in compliance with applicable by-laws and/or zoning and/or condominium requirements.[^4] The effect of this is that the Condominium Corporation cannot assume that the customers and visitors of the shopping complex will be able to use the parking units owned by 251 if the overholding under the 2010 Lease is terminated by either party.
Disposition
[60] For the foregoing reasons, I find that the March 8, 2018 handwritten agreement is unenforceable, and that the Condominium Corporation has continued as an overholding tenant of the parking spaces under the 2010 Lease since the expiry of its term on July 31, 2017. In accordance with s. 6(h) thereof, rent is payable at the rate applicable in July of 2017 during the overholding term and the other covenants, provisos and conditions of the 2010 Lease continue in effect.
[61] The Condominium Corporation is ordered to pay the difference between the monthly amounts owing under the 2010 Lease terms and what it has paid until either party terminates the overholding tenancy which they are entitled to do on one month’s written notice to the other. In the absence of any contractually specified interest rate payable on overdue amounts under the 2010 Lease, interest on the outstanding amounts shall be payable at the applicable Courts of Justice Act, R.S.O. 1990, c C.43, rate. If there are outstanding common area expenses owing by 251 that have been determined or agreed to, they may be set-off against the amounts payable by the Condominium Corporation.
[62] The site plan, Declaration, and/or municipal by-laws do not require the Condominium Corporation to lease parking spaces in the parking structure in perpetuity. I am not ordering the parties to enter into a new lease arrangement or to extent the 2010 Lease. This may have legal consequences for the Condominium Corporation with the municipality, but that is not a matter for me to decide at this time. To the extent that 251 may have otherwise had an obligation to make parking spaces available to the Condominium Corporation, enforceable, for example, under s. 135 of the Condominium Act because it knew about s. 5.4 of the Declaration and by-law 207-95 when it acquired the parking units, it is relieved of such in light of the Condominium Corporation’s position on these applications.
[63] Both parties indicated that if the outcome of these applications leads them into lease negotiations and they cannot agree on fair market rent, they intend to ask the court for further assistance. This issue is not before me. To the extent the parties require the court’s assistance at some future date, they will need to properly frame an issue to be decided with supporting material. I am not seized of any such future dispute, but if it is thought to be more efficient and expeditious for me to hear it, I would be willing to do so, subject to my availability and any scheduling constraints.
Costs
[64] There was not time at the hearing of this application to receive the parties’ submissions as to costs, although each seeks costs against the other. There has been divided success, in that the March 8, 2018 handwritten agreement relied upon by the Condominium Corporation has not been upheld, but the relief sought by 251 to the effect that the Condominium Corporation is required to continue to lease the parking spaces under a lease extension that, in theory, would continue indefinitely also was not granted. My initial impression is that this divided success should result in an order that each party bear their own costs of these applications.
[65] I encourage the parties to try to reach an agreement on costs, taking into account my initial impressions. If an agreement is reached, the parties shall advise me of such by September 25, 2019. However, I recognize that there may be submissions that the parties wish to make about costs that I have not had the benefit of. If no agreement on costs is reached, each party may deliver to the other a brief submission on costs, not to exceed five pages double spaced, together with their costs outline by no later than October 9, 2019 and may each deliver to the other a brief reply submission on costs, not to exceed three pages double spaced by no later than October 18, 2019.
[66] The parties shall provide me with their costs submissions at the same time as they are delivered to each other, by leaving a copy addressed to my attention at Judges’ Administration, Superior Court of Justice at 361 University Avenue (Room 106), Toronto, Ontario M5G 1T3.
Kimmel J.
Released: September 10, 2019
[^1]: The parties agree that the first level of the parkade is sometimes referred to as P1 and sometimes as P2, and that the second level of the parkade is sometimes referred to as P2 and sometimes as P3, but in relative terms, the lower level is the lower number and the upper roof deck is the higher number.
[^2]: During oral argument, counsel for 251 advised that it is no longer seeking an order or declaration that the 2010 Lease continues to be in effect until July 31, 2027, or that it has effectively been extended for a further 10-year term. It revised the summary of relief sought at paragraph 85 of its factum accordingly, to seek only a declaration that the 2010 Lease continued in effect until July 27, 2019, the end of the month following the hearing of the applications (presumably in anticipation of the court’s decision being released before then, although no promises were made that it would be).
[^3]: The reduced rental payments due under the March 8, 2018 handwritten agreement were later and retroactively brought current prior to the hearing of the applications on June 7, 2019.
[^4]: There was a discussion during the hearing of the applications on June 7, 2019 about whether 251 could construct a barrier to prevent patrons of the shopping complex from using any of the parkade that the Condominium Corporation was not paying for, in response to a concern I raised about the prospect of the Condominium Corporation suggesting that, even if it did not pay to lease the parking units, they might still be available to the patrons of the shopping complex. It was noted that the construction of a barrier in the parkade might require an amendment to the Condominium Declaration or by-laws but otherwise it did not give rise to any objection from the Condominium Corporation’s counsel. After the hearing, counsel for the parties forwarded correspondence to me in which they disagreed about what was represented to the court concerning the erection of a gate precluding free access to the parkade, or parts of it. My decision is not dependent on what was represented about this, so I will not say anything further about the prospect of a parking barrier or gate.