Tukahafez Investments Inc. v Experteers Corporation, 2021 ONSC 4460

COURT FILE NO.: CV-21-00658642-0000

DATE: 20210622

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

TUKAHAFEZ INVESTMENTS INC.

Applicant

– and –

EXPERTEERS CORPORATION

Respondent

Jeffrey Radnoff, lawyer for the Applicant

Omer S. Chaudhry, lawyer for the Respondent

HEARD: June 10, 2021

ENDORSEMENT

DIAMOND J.:

Overview

1The applicant is the owner of 8646 Trafalgar Road, Halton Hills, Ontario (“the property”). On or about February 21, 2020, the applicant signed a written lease agreement with the respondent. That lease agreement took the form of standard residential lease in accordance with Form 400 prescribed by the Ontario Real Estate Association (“OREA”).

2In its original Notice of Application, the applicant sought a declaratory Order that the lease agreement between the parties is a commercial lease and subject to the provisions of the Commercial Tenancies Act, R.S.O. 1990 c. L.7 (“CTA”).

3At the return of the application, the applicant sought leave to amend its Notice of Application to include additional relief, including an order terminating the lease and granting possession of the property to the applicant, together with claims for damages for alleged breaches of the lease agreement.

4At the outset of the hearing of the application, the respondent confirmed that it did not oppose the applicant’s request for leave to amend, and as such I granted the applicant leave to amend its Notice of Application.

5With the consent of counsel for both parties, it was determined that the Court would need to first decide the “jump off” issue, namely whether the lease agreement between the parties is a residential or commercial lease. Accordingly, argument on that issue only proceeded before me during the hearing.

6At the conclusion of argument, I took my decision under reserve.

Governing Legal Principles

7The issue is really one of jurisdiction when determining whether a lease agreement is residential or commercial in nature,. If the lease between the parties is commercial in nature and thus governed by the provisions of the CTA, then this Court has jurisdiction to entertain the balance of the relief sought on the application.

8If, however, the lease between the parties is residential - and therefore subject to the provisions of the Residential Tenancies Act, 2006 S.O. 2006, c. 17 (“RTA”) - then the parties must proceed before the Landlord and Tenant Board. Of note, after being served with the Notice of Application, the respondent brought its own application to the Landlord and Tenant Board; that application is currently stayed pending this Court’s disposition of the within application.

9The jurisprudence is clear that when assessing whether a lease is commercial or residential in nature, a primary consideration is the predominant purpose of the occupation and/or use of the leased premises. As held by Justice Roberts in Onthegoshipping Inc. and Leung v. G. Khan Medicine Professional Corporation 2020 ONSC 2789:

“Substance, not form, governs when considering the true nature of a tenancy. Both the Court of Appeal and the Divisional Court have held that s. 202 of the RTA applies when determining whether or not a unit is residential: Matthews, at para.24, quoted with approval in Firm Capital, at para.34. Section 202(1) provides:

In making findings on an application, the Board shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants and in doing so,

(a) may disregard the outward form of a transaction or the separate corporate existence of participants; and

(b) may have regard to the pattern of activities relating to the residential complex or the rental unit.

All the circumstances must be considered to determine the predominant purpose or use of the tenancy. This Court in Fiset, provided examples of circumstances which may be relevant. The circumstances could include:

• The historical use of the premises.

• The intention of the parties.

• Whether the landlord knew the tenant was living at the premises.

• The zoning for the premises.

• The form and wording of the lease.

• Whether the landlord charged GST in relation to the rent.

• Whether the premises are a single unit or whether they were divided into distinct residential and commercial areas, such that the residential area is "attached" to the commercial area.

• Whether or not amenities one would expect in a residential tenancy, such as a stove and a refrigerator, are in the premises.

• The relative share of the premises devoted to commercial use as opposed to residential use.

• How business was conducted at the premises. Was there a "walk-in" trade? Did employees or workers attend the premises in relation to the conduct of the business?

• Whether there are any signs indicating a commercial use.

• The terms of the lease, such as its length, and any provisions for rent increase.”

Decision

10For the reasons which follow, I find that the lease agreement between the parties is a commercial lease, and therefore subject to the provisions of the CTA and the jurisdiction of this Court.

11To begin, while the respondent asks that “special consideration” be given to the fact that the lease agreement is clearly marked residential in accordance with OREA Form 400, as stated above substance over form is to govern any such analysis. The property was purchased by the applicant in January 2020, and is a 100 acre parcel containing a house, barn, two storage towers and a warehouse. While the applicant intends to ultimately develop the property, it wanted to earn some revenue in the interim.

12The lease agreement was prepared by the respondent at the applicant’s request. Neither party had legal counsel or legal advice with respect to the lease agreement. There is no dispute that the respondent carries on business in the construction industry, and in particular the telecommunications business, and needed to locate commercial property for its office and storage of equipment.

13While it is true that the applicant’s president read the draft lease agreement, and is a relatively sophisticated party, he also gave evidence that he relied upon the respondent’s apparent expertise having “entered into leases like this one all the time.”

14The terms of the lease agreement contemplated the respondent’s use of the property for business purposes. In addition to leasing the house and the warehouse for $2,500.00 per month, the respondent agreed to pay for all leasehold improvements it required for the operation of its business.

15The respondent maintained numerous vehicles and equipment at the property, including a front-end loader, pick-up trucks, trailer, tractor and flood bed truck (with the respondent’s corporate logo on the vehicle’s door). The respondent runs its business on the property, and has made substantial road repairs to the property using its own equipment.

16The property is currently zoned for agricultural purposes. Properties which are zoned as agricultural are expressly excluded under the provisions of the RTA.

17In late February 2021, the applicant retained a private investigator to attend the property with audio and video recording equipment. Portions of the videotaped attendance were shown to the Court during the hearing of this application. In my view, it is relatively clear that the respondent used the entire first floor of the house as its business office, complete with multiple workstations for construction and I.T. purposes.

18Posters on the office walls contained information relating to WSIB policies and procedures. The respondent’s corporate logo and name were placed in plain sight on the first floor of the house, and shortly after signing the lease agreement, the respondent changed its registered corporate head office to the property’s address.

19The applicant’s president had no idea whether anyone was in fact residing at the property. The respondent gave evidence that its principal did reside on occasion on the upper floor of the house, but in my view that was never the intended purpose of the lease agreement. In fact, the private investigator observed the respondent’s principal working at the property, but returning home to sleep at his residence (5149 Tree Crest Court, Mississauga, Ontario). It was only after the dispute between the parties giving rise to this litigation began that the respondent alleged that he was residing (albeit intermittently) at the property.

20Accordingly, I find that the lease agreement between the parties is a commercial lease and subject to the provisions of CTA. I therefore grant the declaratory relief sought by the applicant.

21If the parties cannot resolve the balance of the relief sought on the Amended Notice of Application, they may proceed to schedule a second hearing, or perhaps convert the application into an action or a trial of the remaining issues. I am not seized of the balance of this application.

Costs

22If either party seeks its costs of this application, I would urge counsel to exert the necessary efforts and try to resolve those costs. If such efforts prove unsuccessful, the parties may serve and file written costs submissions, totaling no more than five pages including a Costs Outline, in accordance with the following schedule:

a) the applicant shall have 10 business days from the release of this Endorsement to serve and file its written costs submissions; and

b) the respondent shall have 10 business days from the receipt of the applicant’s written costs submissions to serve and file its own responding written costs submissions

Diamond J.