Court File and Parties

COURT FILE NO.: CV-20-636483 DATE: 20200721 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 10381187 Canada Inc. and Elias Markos, Applicants AND: Elena Cherny, Respondent

BEFORE: Davies J.

COUNSEL: James McReynolds, for the Applicants Irvin Schein and Samantha Schreiber, for the Respondent

HEARD: July 21, 2020

Supplementary Reasons

[1] In July 2019, Elena Cherny bought a house in the Annex neighbourhood of Toronto. The house was zoned for use as a single-family dwelling but was divided into several apartments when she bought it. In October 2019, Ms. Cherny leased the whole house to Mr. Markos and his company, 10381187 Canada Inc. (“103”), for 10 years. The lease agreement required Ms. Cherny to renovate the house into six units. Mr. Markos and 103 were given authority to market and sublease the six units as short-term rentals. They were also given a right of first refusal if Ms. Cherny decided to sell the property.

[2] Ms. Cherny created the additional units. Mr. Markos and 103 took possession of the house on December 1, 2019 and started renting out units on various online platforms catering to short‑term vacation rentals.

[3] In January 2020, the City of Toronto issued an Order to Comply that required Ms. Cherny to either obtain a permit for the construction that had been done to sub‑divide the property or remove the illegal construction. Ms. Cherny removed the illegal construction, changed the locks and prevented Mr. Markos and 103 from accessing the property.

[4] Mr. Markos and 103 issued a Notice of Application seeking specific performance of the lease and damages for the breach of the lease. Mr. Markos and 103 also sought and were granted leave to register a certificate of pending litigation on the property. Ms. Cherny brought a motion to discharge the certificate of pending litigation so she can lease, sell or refinance the house.

[5] On July 14, 2020, I released my reasons in this matter. I ordered a trial on two issues:

(a) Is the lease between Ms. Cherny, Mr. Markos and 103 void or voidable because it is illegal? (b) If the lease was legal, did Ms. Cherny breach the lease?

[6] I also found that damages are a wholly adequate remedy if Ms. Cherny breached the lease. On that basis, I found that specific performance is not an available remedy in this case.

[7] I granted Ms. Cherny’s motion to discharge the certificate of pending litigation with the following conditions:

(a) Ms. Cherny cannot use the property as collateral to secure additional credit beyond the refinancing that is currently available to her through the Royal Bank of Canada; (b) Ms. Cherny cannot transfer title to the property to anyone other than through a bona fide sale to a third party for all cash proceeds; and (c) If Ms. Cherny sells the property before this matter is complete, the proceeds from the sale (net of mortgage repayment, real estate commission and legal fees to close) are to be paid into the Court.

[8] The parties requested an urgent case conference to settle the order. Counsel for Mr. Markos and 103 argued that I should add a further condition to the order to preserve his clients’ right of first refusal if Ms. Cherny decides to sell the property before trial. Counsel argued that the right of first refusal should be maintained until there is a ruling on the legality of the lease.

[9] Counsel for Ms. Cherny argued that I have already implicitly ruled on the right of first refusal by finding that specific performance is not an available remedy in this case. I agree.

[10] One aspect of specific performance in this case would have been the ability of Mr. Markos and 103 to enforce the right of specific performance in the contract. I have already ruled that specific performance is not available because the property is not unique and damages are an adequate remedy. I, therefore, decline to include any condition in my Order with respect to the right of first refusal.

[11] Counsel are to contact my assistant, Lorie Waltenbury (lorie.waltenbury@ontario.ca), to arrange a further case conference to discuss the schedule for the trial in this matter, including whether the issue of damages will be addressed at the trial or by way of a reference under Rule 54.04.

Davies J. Date: July 21, 2020