OVERVIEW

[1] The Applicant, ALYU Inc. (ALYU) purchased two commercial condominium units from the Respondent, Deca-Yorkville Building Group Inc. (Deca), pursuant to an Agreement of Purchase and Sale dated March 27, 2017 (the Agreement). The condominium building is located at 135 Yorkville Avenue, Toronto. The developer of the condominium was the Respondent, Camrost Felcorp Inc.

[2] At the time of the purchase, the building was under construction. The size the units would be following construction, was not known. The purchase price was calculated on the estimated area of the units being 2,248 square feet at the rate of $870 per square foot of gross area. If the actual size of the units was less than 2,248 square feet, the purchase price would be adjusted accordingly.

[3] ALYU states that following construction, the units measured only 1,738 square feet and as a result, it seeks a refund of the amount it overpaid in the transaction. Deca states that the gross area of the units includes the proportionate share of the common areas on the floor where the units are located as well as a share of the common areas of the building. The gross area was calculated to be 2,203 square feet. Deca states that the purchase price of the units was based on the actual gross area of 2,203 square feet and therefore ALYU is not entitled to a refund of the purchase price.

[4] For the reasons set out below, I find that the Agreement provides that the purchase price of the units is based on the actual gross area, which includes a proportionate share of the floor and building common areas. The gross area was measured at 2,203 square feet. The purchase price was properly calculated on this measurement and therefore ALYU is not entitled to a refund of the purchase price. I dismiss the Application.

BACKGROUND FACTS

[5] ALYU’s director, Lawrence Ullman and its real estate counsel, Ronald Melvin began negotiating with Deca to purchase commercial units, beginning in December 2016. Initially ALYU was interested in purchasing units on the seventh floor of the building. The units on the seventh floor were smaller than the units on the fourth floor. Also, the units on the seventh floor did not have a terrace.

[6] Ultimately the parties agreed to the purchase and sale of units 404 and 405 on the fourth floor. The Agreement provides that ALYU is purchasing the “above-described condominium units and the appurtenant common interest as specified in the Declaration (such above-described units and their appurtenant common interest hereinafter collectively called the “Unit”). Schedule A to the Agreement is a diagram of the units purchased. The diagram includes the common interest spaces on the fourth floor including the men’s and ladies’ washrooms and an outdoor terrace. Mr. Ullman made handwritten notes on Schedule A. He noted that unit 4 was 883 square feet and unit 5 was 1365 square feet. The total was 2,248 square feet. These measurements were the estimated size of the usable area of the units plus a proportionate share of the common areas on the fourth floor and the common areas of the building.

[7] The Agreement provides that the price is based on $870 per square foot of actual gross area. On the unit transfer date, the Vendor was required to deliver a certificate of its surveyor certifying the actual gross area of the units. The purchase price would be adjusted based on the surveyor’s certificate. The calculation of the purchase price is set out in special provision 9:

SP 9 - Calculation and Adjustment of Purchase Price - Notwithstanding the terms of this Agreement, the Purchase Price has been calculated on the basis of the estimated area of the Unit being 2,248 square feet at the rate of $870.00 per square foot of gross area calculated in accordance with the measurement terms set out in Clause 15 of this Agreement. On or before the Unit Transfer Date, the Vendor shall deliver a certificate of its surveyor certifying the actual gross area calculated in accordance with the measurement terms set out herein to 3 decimal points and the Purchase Price shall be adjusted based on such certificate. The Purchaser acknowledges and agrees that the plans and current areas are preliminary and therefore layouts and dimensions are approximate and subject to change by the Vendor.

[8] Clause 15 of the Agreement of Purchase and Sale provides as follows:

UNIT DIMENSIONS AND PRICE ADJUSTMENT

The purchaser acknowledges that notwithstanding anything contained in any brochures, drawings, plans, advertisements or other marketing materials or any statements made by the Vendor's sales representatives, there is no warranty or representation contained herein on the part of the Vendor as to the area or the Unit or any other matter. The purchaser further acknowledges that any dimensions, celling heights, or other data shown on such marketing materials are approximate only - and that the Purchaser is not purchasing the Unit on a price per square foot basis. Ceiling heights may vary based on upon bulkheads, ducts or other design requirements. Accordingly, the Purchaser shall not be entitled to any abatement or refund of the Purchase Price based on the precise area and/or final configuration and/or celling height or the constructed unit.

The purchaser acknowledges that the area of the unit which has been represented or referred to by the Vendor or any sales agent or which appears in any sales material is based upon ANSI/BOMA Z65.1 ~1996 standard of measurement ("BOMA standard - 1996") and is approximate only. Actual usable floor space may vary from any stated or represented floor area or gross floor area and the extent of the actual or usable space or net floor area within the confines or the Unit made (sic) vary from any represented square footage or floor area measurement(s) made by or on behalf of the Vendor.

[9] Clause 15 of the Agreement provides that the calculation of the area of the unit is based on the ANSI/BOMA Z65.1-1996 standard of measurement. The BOMA 1996 Standard provides standardized measurement methods for office building space. The BOMA 1996 Standard does not define the terms “gross area” or “actual gross area”. It defines “usable area”, as the actual area of the unit from inside of the wall to the inside of the wall. It defines “rentable area” as the usable area plus a “gross-up” to incorporate a portion of the common areas of the floor where the unit is located as well as the common areas in the other parts of the building.

[10] ALYU included in its Book of Authorities a document entitled, “ANSI/BOMA Z65.1-1996 Standard Method for Measuring Floor Area in Office Buildings”. The document lists frequently asked questions and answers. One of the answers provides that the BOMA 1996 Standard’s method for calculating the rentable area includes a gross-up for both floor common areas and a gross-up for building common areas. The document states that the intent of the Standard is “for Building Common Area to be part of the Floor Usable Area”.

[11] In June 2018, prior to the unit transfer day, Deca delivered to ALYU an area measurement certificate. The certificate measured the rentable area of the unit at 2,203 square feet. This measurement was the usable area of the units grossed-up to take into account the common areas on the fourth floor and the common areas in the other parts of the building. ALYU’s surveyor was Maja Krcmar, an Ontario Land Surveyor. In her certificate, dated June 25, 2018, she stated as follows:

This is to certify that the total rentable area of Units 4 and 5 on Level 4 is 2,203 square feet, derived from field measurements completed on November 2, 2019, and the electronic file of the architectural drawings.

Note: The method of measurement for the Rentable Area of the premises is based on ANSI/BOMA Z65.1-1996 standard, which has been utilized in the calculation of “Useable” and Grossed Up areas. All BOMA-Specific Terminology is defined in accordance with that standard.

[12] The purchase price was revised based on the measurement of 2,203 square feet. This resulted in a final purchase price of $1,916,610. The purchase of the units closed on August 28, 2018.

[13] On or before November 1, 2019, ALYU retained Extreme Measures to calculate the area of the units. Extreme Measures prepared a quote based on the gross area of the units, estimated to be 2,500 square feet. On November 1, 2019, Russel Morris, the director of operations at Extreme Measures wrote to Kevin Fullerton at ALYU to clarify the assignment. He noted that they can calculate the usable area of the units but would be unable to complete a calculation based on the BOMA 1996 Standard, which includes the common areas on the floor where the unit is located, and the common areas in the other parts of the building. He stated as follows:

As the quote was already sent, I want to point out [a] fairly material consideration. The BOMA 1996 Standard is a holistic review of the entire building. What it seeks to do is calculate but then allocate common areas of the building, to each tenant on a pro-rata basis (highly simplified description of what happens). This means that the area that results, is the physical space you occupy plus a share of the corridor, washrooms, mechanical rooms, etc. This is a widely adopted Standard across North America that nearly every landlord uses.

I mention this not only to educate but to also explain that without measuring the entire building and all tenants within it, we cannot arrive at your Rentable Area, which is what your lease would be based on. We can calculate the net area of Usable Area of the space.

[14] I note that ALYU did not initially disclose the letter from Mr. Morris dated November 1, 2019. The letter was later produced as an answer to an undertaking.

[15] Extreme Measures measured the “usable area” or “net floor area” within the actual unit. The measurement did not include a gross-up for the common areas of the fourth floor or the common areas in the rest of the building. Extreme Measures determined that the usable area within the actual unit was 1,738 square feet.

[16] ALYU took the position that the measurement of the units by Extreme Measures was in accordance with the terms of the Agreement. By e-mail sent on December 11, 2019, ALYU’s lawyer sought an adjustment of the purchase price based on the certificate of usable area completed by Extreme Measures. An area measurement of 1,738 square feet resulted in a purchase price of $1,512,060.

[17] Deca and its surveyor, Krcmar took the position that the measurement carried out by Extreme Measures was not in accordance with the terms of the Agreement. The measurement did not comply with the BOMA 1996 Standard because it did not include a gross-up to take into account the proportionate share of the floor or building common areas. In her e-mail sent on December 16, 2019, Ms. Krcmar stated that the term, “rentable area”, as defined in BOMA 1996 Standard is determined from the calculation of the usable area plus a gross-up, which is the proportional allocation of floor and building common areas. She noted that Extreme Measures only calculated usable area of the unit without including the gross-up for floor and building common areas.

[18] After receiving Deca’s position, Mr. Fullerton of ALYU wrote to David Fingret, the president of Extreme Measures and asked whether the BOMA 1996 Standard referenced in the Agreement includes a gross-up of the area of the unit to include the common areas on the fourth floor or would it also include a gross-up for the common areas in the rest of the building. Mr. Fingret responded on December 18, 2019, as follows:

In order to determine the rentable area of the unit according to BOMA 1996, we would need to determine the proportionate share of the floor common area and building common area, which requires the entire building to be measured.

[19] On January 30, 2020, ALYU continued to take the position that the purchase price was based on the usable space in the unit and that it did not include a gross-up for the floor or building common areas. Ms. Krcmar provided a further response on February 4, 2020. She confirmed that the BOMA 1996 Standard requires a building-wide method of measurement that includes the associated share of floor common areas and building common areas.

[20] Following Ms. Krcmar’s response, ALYU’s new surveyor, Space Database provided its comments with respect to the BOMA 1996 Standard by letter dated February 11, 2020. Daniel Martin confirmed Ms. Krcmar’s definition of rentable area set out in her letter dated December 16, 2019. He states that to determine the rentable area, the usable area is to be gross-ed up:

The standard offers a definition of Rentable Areas: “RENTABLE AREA is determined by multiplying the USABLE AREA of an OFFICE AREA by the R/U RATIO. In the commercial real estate industry, the R/U Ratio is typically referred to an a “gross-up”. It then follows that a “grossed-up area” is the equivalent to the Rentable Area for any specific Suite, because the Usable Area is “grossed-up” to produce the Rentable Area.

THE ISSUE

[21] The only issue for determination on this Application is whether the “actual gross area” language contained in the Agreement requires the calculation of the purchase price to be based on the net area of the unit as argued by ALYU, or whether it is based on the area of the unit plus a gross-up to include the floor and building common areas, as argued by Deca.

ANALYSIS

Law of Contractual Interpretation

[22] There is no significant dispute as between the parties with respect to the relevant law. The objective of contractual interpretation is to ascertain the objective, mutual intentions of the parties. To determine the parties’ intentions, the decision-maker must read the contract as a whole, giving the words used their ordinary meaning and, in a manner, consistent with the surrounding circumstances known to the parties at the time of the formation of the contract: Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, at paras. 47 and 55.

[23] The following principles apply to the interpretation of contracts:

(a) the contract must be interpreted as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(b) the contract is to be interpreted by determining the intention of the parties in accordance with the language they have used in the written document;

(c) regardless of whether an ambiguity exists, the contract is to be interpreted with regard to objective evidence of the factual matrix underlining the negotiation of the contract without reference to the subjective intention of the parties; and,

(d) to the extent that there is any ambiguity in the contract, the contract must be interpreted in a fashion that accords with sound commercial principles and good business sense that avoids a commercial absurdity: Plan Group v. Bell Canada, 2009 NCA 548, at para. 37.

[24] The starting point in the analysis is to consider the words chosen by the parties. The parties are presumed to have intended what they have said: Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, at para. 16.

Position of the Parties

[25] ALYU argues that the term “actual gross area” used in the Agreement means the usable space of the unit including interior columns or other structural elements contained within the unit and does not include a gross-up for the floor or building common areas. ALYU states that the BOMA 1996 Standard defines categories of measurements, and that reference to the Standard does not necessarily mean that the measurement of the unit is to include common areas. ALYU argues that the Standard does not define “actual gross area” and therefore the reference to the Standard does not assist the parties, “that much” in how the unit is to be measured. Although it is ALYU’s position that the meaning of the term “actual gross area” is unambiguous, it argues in the alternative that if there is any ambiguity, the Agreement was drafted by Deca and therefore the ambiguity is to be resolved in ALYU’s favour.

[26] Deca argues that all words used in the Agreement must be given their usual meaning. SP 9 refers to the “actual gross area” and states that the measurement is in accordance with Clause 15. Clause 15 states that the measurement of the calculation of the unit area is in accordance with the BOMA 1996 Standard. The BOMA 1996 Standard requires a gross-up of the usable space in the unit to include a proportion of the floor and building common areas. When SP 9 is read together with Clause 15 and the requirement that the measurement be in accordance with the BOMA 1996 Standard, the reference to gross actual area is the area of the unit plus a gross-up for the floor and building common areas. Deca argues that there would have been no need to refer to the BOMA 1996 Standard if the measurement of the unit was not to include the floor and building common areas.

Interpretation of the Agreement

[27] The starting point in the analysis is a consideration of the words used by the parties in the Agreement.

[28] The unit is described in the Agreement as the condominium unit and “the appurtenant common interest”. The diagram of the unit as set out in Schedule A, includes the common areas of the fourth floor. I am of the view that the description of the unit does not support ALYU’s position that the purchase price is to be based only on the usable area of the unit without taking into account the common areas.

[29] ALYU argues that the term “actual gross area” is not defined in either the Agreement or the BOMA 1996 Standard. It states that a reasonable interpretation of the Agreement is that “actual gross area” must include the usable area of the unit including the columns and other structural elements that may be contained within the unit. Therefore, ALYU argues that the inclusion of the word “gross” does not necessarily mean that the parties intended to include any area outside the unit in the measurement of actual gross area.

[30] In support of its position, ALYU argues that the parties specifically rejected the wording that the measurement of the unit was to be grossed-up to include common areas. ALYU refers to the negotiations for the purchase of the units on the seventh floor. ALYU had offered to purchase units on the seventh floor for $780 per square foot of “grossed up area”. It states that specific language was used to include common areas in the negotiations for the units on the seventh floor. SP 3 of that draft agreement provides as follows:

[….] the office unit shall have an aggregate useable area of not less than ______square feet without exclusion for any interior columns, projections or other such structural elements. For the purpose of calculating the purchase price of the Office Unit, such aggregate actual usable area shall be grossed up by an amount equal to ___% thereof to reflect the Purchaser’s payment toward the cost of the common elements in the Condominium.

[31] Counsel for ALYU submits that in the Agreement for the purchase of the fourth floor units, the parties specifically rejected the “grossed up area” language found in the drafts for the purchase of the units on the seventh floor. ALYU was prepared to pay $780 per square foot for the seventh floor which included the common areas in the calculation of the unit size. ALYU argues that it would be a “commercial absurdity” that it would have agreed to the higher price of $870 per square foot and to also have the calculation include common areas.

[32] Although ALYU now takes the position that it was prepared to pay a higher square footage cost for the fourth floor because the measurement would not include the common areas, there is no contemporaneous evidence to support this position. There is nothing in ALYU’s real estate lawyer’s file that references an intention to not pay for common areas when purchasing the fourth floor units. Mr. Ullman, in his affidavit sworn September 17, 2021, states that ALYU decided to purchase the units on the fourth floor for two primary reasons. The space on the seventh floor was not large enough to accommodate ALYU. Also, the space on the seventh floor did not have a terrace.

[33] I am not satisfied that the terms of a draft agreement for units not purchased and that have different features, is of any probative value in determining the issues in this Application. In any event, I am of the view that both the draft agreement for the purchase of the seventh floor units and the Agreement entered into by the parties for the fourth floor units, provide that the measurement of the units is to include a gross-up for the common areas.

[34] The Agreement for the purchase of the units on the fourth floor did not include SP 3 or 4 from the draft agreement for the purchase of the units on the seventh floor. Instead, SP 9 was included which specifically states that the unit measurement is to be in accordance with Clause 15. Clause 15 states that the measurement is to be consistent with the BOMA 1996 Standard. There is no ambiguity with respect to what was meant by the BOMA 1996 Standard. Both parties’ surveyors state that the BOMA 1996 Standard requires the area of the unit to be grossed-up to take into account the common areas on the floor where the unit is located as well as the common areas in the building.

[35] In his letter dated November 1, 2019, Mr. Morris, the director of operations of Extreme Measures states that the BOMA 1996 Standard is a “holistic” review that includes the common areas of the building. Mr. Fingret, the president of Extreme Measures in his letter dated December 14, 2019, states that the BOMA 1996 Standard requires a calculation of the proportionate share of the floor common areas and building common areas. Ms. Krcmar, in her letter dated February 4, 2020, confirms that the BOMA 1996 Standard requires a building-wide measurement that includes the associated share of floor common areas and building common areas. Mr. Martin, in his letter dated February 11, 2020, confirms that the calculation of rentable area requires the usable area of the unit to be grossed-up.

[36] Counsel for ALYU was unable to provide an explanation for why the Agreement refers to the BOMA 1996 Standard if the measurement of the units was not to include the common areas. He suggested that there are a number of different ways to calculate area set out in the BOMA 1996 Standard and the reference in Clause 15 of the Agreement may have been in reference to one of those different methods of calculation. He stated that the reference to the BOMA 1996 Standard does not assist the parties “that much” in determining how the units are to be measured for the purpose of determining the purchase price.

[37] In interpreting a contract, the court is to give meaning to all terms used by the parties. Here the parties stated that the measurement of the units for the purpose of determining the purchase price, is to be in accordance with the BOMA 1996 Standard. The BOMA 1996 Standard applies a “holistic” method to the measurement of the units and includes the common areas on the floor where the units are located and the common areas in the other parts of the building. I am satisfied that when giving meaning to all terms used in the Agreement, the parties intended the measurement of the units to include the common areas. Any other interpretation would have the effect of ignoring the words, “BOMA 1996 Standard”.

Conclusion

[38] The Agreement provides that the “Unit” purchased includes the “appurtenant common interests”. Schedule A to the Agreement shows the units together with the floor common areas, such as the washrooms and the exterior terrace. SP 9 provides that the purchase price is based on the “actual gross area” as measured pursuant to Clause 15. Clause 15 states that the measurement is to be in accordance with the BOMA 1996 Standard. The BOMA 1996 Standard requires the measurement of the unit to be “grossed-up” to take into account the common areas of the floor where the unit is located as well as the common areas in the rest of the building.

[39] When meaning is given to the entirety of the Agreement, I am satisfied that the term “actual gross area” includes a “gross-up” of the usable area of the unit to include a proportion of the floor and building common areas. The fact the BOMA 1996 Standard requires a gross-up to take into account the common areas, was clearly understood by the surveyors retained by both the ALYU and Deca. If the measurement was not to include common areas, there would have been no reason to refer to the BOMA 1996 Standard in the Agreement.

DISPOSITION

[40] I dismiss the Application. The Agreement provides that the unit size is to be calculated on a gross basis in accordance with the BOMA 1996 Standard. The Standard requires the usable area of the unit to be grossed-up to take into account the floor and building common areas. I am satisfied that Deca’s surveyor properly calculated the “actual gross area” in accordance with the BOMA 1996 Standard. The gross area was measured at 2,203 square feet. The purchase price was based on this measurement. ALYU is not entitled to any further refund of the purchase price.

[41] Deca is successful on the Application and is presumptively entitled to its costs. If the parties are unable to agree on costs, Deca may deliver written cost submissions of no more than three pages, excluding the Bill of Costs and caselaw within 14 days of the date of this endorsement. ALYU may deliver its written cost submission in reply on the same basis, within 14 days of receiving Deca’s cost submission.

Chalmers, J.

DATE: March 9, 2021

COURT FILE NO.: CV-20-00647470

DATE: 20220309

ONTARIO

SUPERIOR COURT OF JUSTICE

ALYU INC.

Applicant

and

DECA-YORKVILLE BUILDING GROUP INC. and CAMROST FELCORP INC.

Respondents

REASONS FOR decision

Chalmers, J.

Released: March 9, 2022

ALYU Inc. v. Deca-Yorkville Building Group Inc., 2022 ONSC 5338

Case Summary

OVERVIEW

BACKGROUND FACTS

THE ISSUE

ANALYSIS

Law of Contractual Interpretation

Position of the Parties

Interpretation of the Agreement

Conclusion

DISPOSITION

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Issues

Legal Tests 1