COURT FILE NO.: CV-22-00675756-0000
DATE: 20221003
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Al-Waleed Salon Inc. and Kamal Baddad
Applicants
– and –
Asad Amiri
Respondent
Colin C.G. Pye, for the applicants
John A. Annen, for the respondent
HEARD: September 26 and 27, 2022
Robert CentA J.
[1] Kamal Baddad operates the Al-Waleed Salon Inc. Since 2013, the salon has rented its operating space from Asad Amiri. On December 14, 2021, Mr. Amiri evicted the applicants from the premises. The applicants brought this application pursuant to the Commercial Tenancies Act, R.S.O. 1990, c. L.7 (the “Act”), for relief from forfeiture of the leased premises, for a declaration that the termination of the lease was null and void, and for enforcement of the lease that the applicants submit is in place.
[2] This matter proceeded by way of summary trial. Mr. Baddad and Mr. Amiri each filed affidavits, which were supplemented by in-court examination and cross-examination. In addition, Mr. Baddad’s daughter, Miriam Baddad, and Mr. Amiri’s paralegal, Ranjan Mahavalirajan, each testified over the two days of trial.
Facts
[3] Many of the facts related to this proceeding are not in dispute. In this section, I will set out the uncontroversial facts and flag the issues in dispute. I will return to the disputed evidence more carefully as I consider the three issues raised in this proceeding.
[4] Kamal Baddad has worked as a barber for 29 years. Since 1998, the Al-Waleed Salon Inc. has operated a barbershop out of the storefront at 1835 Lawrence Avenue East.
[5] On June 24, 2013, Mr. Amiri purchased the land and buildings located at 1835 Lawrence. On October 1, 2013, Mr. Amiri signed a five-year lease with Mohammad Baddad, Kamal’s brother, and Al-Waleed Salon Inc.
[6] In 2014, Mr. Baddad purchased the Al-Waleed Salon Inc. corporation from his brother for $60,000. Mr. Baddad became the sole shareholder, officer, and director of Al-Waleed Salon Inc. At this time, he also took over the lease. Mr. Baddad described this arrangement as a sub-lease. In any event, Mr. Amiri did not raise any objection to the new arrangement. Mr. Baddad paid $2,315 per month in rent for the storefront.
[7] In approximately 2015, a tenant moved out of the upstairs space at 1835a Lawrence. Mr. Baddad then rented this additional space from Mr. Amiri for $800 per month, which he first paid in cash and later paid by cheque. This unit was not covered by the lease signed in 2013. For about 18 months, Mr. Baddad attempted to operate the space as a hair salon for women, but that venture was not successful.
[8] The lease expired on October 31, 2018, without Mr. Amiri or Mr. Baddad taking any steps to renew its terms. Mr. Baddad and the salon remained in possession of the premises and paid rent to Mr. Amiri, who accepted the rent cheques. By operation of section 11 of the lease, this created a monthly tenancy, subject to all of the other terms and conditions of the lease. This arrangement stayed in place through July 2019, nine months after the lease expired.
[9] On July 15, 2019, Mr. Amiri and Mr. Baddad met to discuss a new lease for the premises. At this time, Mr. Baddad was paying total rent of $3,115 per month ($2,315 for the storefront and $800 for the upstairs unit). The parties dispute what happened at this meeting and what, if any, agreement was reached at this time. I will address that dispute below.
[10] The parties agree that as of August 1, 2019, Mr. Baddad started to pay rent in the amount of $3,300 per month, which covered both the storefront and the upstairs unit. Mr. Baddad paid this new amount without interruption through December 2019.
[11] In early 2020, the salon was affected by the COVID-19 pandemic. From time-to-time, it was forced to close its doors by the various government orders promoting public safety.
[12] On January 1, 2021, Mr. Amiri wrote to Mr. Baddad to advise that his rent was past due. Mr. Amiri stated that he had “been lenient with rental payments due to the current situation, but unfortunately, I have to cover my mortgage payments as mentioned above.”
[13] On April 9, 2021, Ranjan Mahavalirajan, a paralegal, wrote to “Mohammad Kamal Baddad” on behalf of Mr. Amiri. It appears that this was an amalgam of the names of the two Baddad brothers. There is no one named Mohammad Kamal Baddad involved in this case. Mr. Mahavalirajan stated that the “last lease executed” between the parties had expired and that Mr. Baddad owed $9,700 in rent, excluding the $2,000 cheque dated April 1, 2021. The letter also asserted, for the first time, that Mr. Baddad had violated the lease by doing renovations to the premises without Mr. Amiri’s consent. Mr. Mahavalirajan stated that the letter constituted 15 days notice of termination of the tenancy and that Mr. Baddad would thereafter be evicted by the bailiff.
[14] On May 18, 2021, Mr. Baddad made a payment of $11,000 to Mr. Amiri. This appears to have resolved the immediate dispute between the parties. Mr. Amiri did not seek to evict Mr. Baddad and did not accept the funds under protest or with an express reservation of rights.
[15] On July 21, 2021, Canada Revenue Agency (“CRA”) determined that Al-Waleed Salon was eligible for a rent subsidy under the Canada Emergency Rent Subsidy (“CERS”) for the periods May 9 to June 5, 2021, and June 6 to July 3, 2021. On September 13, 2021, CRA determined that Al-Waleed Salon was eligible for CERS for the periods July 4 to July 31, 2021, and August 1 to August 28, 2021. Mr. Baddad received cheques dated May 17, 2021, and September 13, 2021, in respect of the subsidy.
[16] On August 17, 2021, Mr. Mahavalirajan wrote to Mr. Baddad and enclosed “the draft lease to sign.” The lease was to be signed and returned within seven days. The lease appeared to propose a lease term of two years, covered both 1835 and 1835a Lawrence, and contemplated rent of $4,800 per month in the first year and $5,416 per month in the second year. Mr. Baddad did not sign this lease.
[17] On October 7, 2021, Mr. Mahavalirajan wrote to Mr. Baddad. He stated that since Mr. Baddad had not signed the “new lease” that was provided on August 17, 2021, “within 7 days time” the tenancy was on a “month to month basis.” The letter noted that Mr. Amiri had received the September 2021 rent, and that the deposit would be applied to the October 2021 rent. The letter concluded:
Please note that this letter constitutes as the Notice of Termination. The termination date is November 30, 2021. This notice is issued on behalf of the landlord, Asad Amiri. The date of termination is November 30, 2021. This constitutes more than 30 days for termination required under the Commercial Tenancy Act. Should you fail to vacate on or before the Termination date, the enforcement will take effect immediately.
[18] On November 29, 2021, Mr. Baddad applied for CERS for the periods August 29 to September 25, and September 26 to October 23, 2021.
[19] A further draft lease was prepared, dated as of November 30, 2021, although the evidence was not clear regarding who prepared this document. This version contained a proposed lease term of five years commencing January 1, 2022, and rent of $4,300 per month for the first three years and $4,500 per month in the final two years.
[20] On November 30, 2021, Mr. Baddad and his daughter, Miriam Baddad visited Mr. Mahavalirajan’s office. The parties dispute what took place on that day and what documents Mr. Baddad delivered to Mr. Mahavalirajan. I will address that dispute below.
[21] On December 10, 2021, Mr. Amiri cashed three cheques from the Al-Waleed Salon Inc., which were dated October 1, November 1, and December 1, 2021. The parties agree that these payments cleared up any rent owing to Mr. Amiri. The evidence is not clear regarding how and when Mr. Baddad delivered those cheques to Mr. Amiri, although Mr. Mahavalirajan was certain that the cheques were not delivered to him.
[22] On December 14, 2021, Mr. Amiri authorized Kay Bailiff & Adjustment Inc. to re-enter the premises at 1835 Lawrence and to change the locks. In the letter of instruction, Mr. Amiri stated that there was no lease in place. He described the reason for the re-entry as follows: “Tenant refuse to sign lease dated August 17, 2021. Therefore, the tenant is overholding the rental unit.”
[23] On February 16, 2022, counsel for Mr. Amiri invited Mr. Baddad to remove any objects that remained on the premises. Mr. Baddad did not respond to this offer and the remaining objects were placed in garbage bags and removed.
[24] Mr. Amiri has subsequently leased the upstairs portion of the premises for $2,000 per month. He has not yet leased the storefront.
Issues
[25] This application raises the following issues:
a. Did the parties enter into a new lease agreement on July 15, 2019?
b. Did the provisions of Bill 229 prevent Mr. Amiri from terminating the tenancy on December 14, 2021?
c. Is Mr. Baddad entitled to relief from forfeiture?
Issue One: the parties did not enter a new lease on July 15, 2019
Mr. Baddad’s evidence
[26] Mr. Baddad testified that on July 15, 2019, he and Mr. Amiri agreed to enter a new ten-year lease on substantially the same terms as the old lease. Mr. Baddad testified that on that day, Mr. Amiri called and advised him that the lease had expired. Mr. Baddad did not have a copy of the 2013 lease, and this was the first he learned that the lease had expired. An hour or two later, Mr. Amiri and his cousin came by the salon to discuss the new lease.
[27] Mr. Baddad testified that they met outside the shop because there were clients inside the salon. Mr. Amiri asked for a rent increase of $400 to a new rate of $3,500 per month. Mr. Baddad said that he made a counter proposal of $3,300, which Mr. Amiri accepted. The combined rent for the storefront and the upstairs premises would increase to $3,300 per month, with annual rent increases not to exceed 1.5% per year and not to commence until August 1, 2022.
[28] Mr. Baddad stated that the parties agreed that the new lease would run for ten years, from August 1, 2019, until July 31, 2029, with Mr. Baddad holding an option to renew for a further ten years. He explained that he wanted a long lease term because the barbershop had already been there for 24 years, and the location was very important for his long-term, walk-up customers.
[29] Mr. Baddad stated that Mr. Amiri called him at the end of July 2019 and asked him to start paying the new rent as of August 1. Mr. Baddad asked Mr. Amiri for a copy of the new lease, which was to be prepared by Mr. Amiri’s real estate agent. Mr. Baddad said that Mr. Amiri said that his real estate agent had gone home for several months and could not prepare the lease. Mr. Baddad said that he told Mr. Amiri that was okay, he would pay the new amount and wait for the lease to be prepared. Mr. Baddad said that Mr. Amiri continued to make excuses for why the lease was not prepared and that he never received a copy of it.
Mr. Amiri’s evidence
[30] Mr. Amiri denies that he entered into a renewal lease with Mr. Baddad on July 19, 2019. He explained that after the 2013 lease expired, he was basically in a never-ending series of negotiations with Mr. Baddad. He was having trouble paying the mortgage on the building and he wanted to significantly increase the rent. He stated that in July 2019, Mr. Baddad proposed increasing the rent to $3,300, all inclusive, in the new lease. Mr. Amiri said that he would not agree to a new lease with that rent figure, as he thought it was too low to support his expenses. He explained that his monthly mortgage payments alone were $3,000 and he wanted to increase the rent significantly.
[31] Mr. Amiri agrees that he accepted rent in the amount of $3,300 starting August 1, 2019, but was adamant that he would not sign a lease for that new figure. He recalls Mr. Baddad asking him to give Mr. Baddad a lease containing that rent figure, but Mr. Amiri refused. He felt his hands were tied: he needed to service his mortgage, but he could not agree to a rent figure that low.
[32] Mr. Amiri recalls a series of discussions with Mr. Baddad about the terms of the new lease that stretched out after July 2019. He recalls that Mr. Baddad brought a friend to one of the meetings to try and conclude the lease. He remembers saying that Mr. Baddad needed to talk to his lawyer, that he was not very experienced with leases, and that his lawyer would handle the negotiations. He also recalled a dispute over Mr. Baddad paying HST on top of the rental amounts, which Mr. Baddad did not want to do, even though he could claim the HST credit.
Conclusion
[33] I find that the parties did not enter into a new lease agreement on July 19, 2019. I think both Mr. Baddad and Mr. Amiri tried to be candid and honest in their evidence. They may each believe that their version of events is true and accurate. It is also possible, however, that the language barriers between them complicated their communications and led to misunderstandings between them.
[34] The parties to a lease must form a mutual intention to enter into an agreement with each other. They must also agree on the terms of that bargain: Brownlee v. Kashin, 2015 ONSC 1035, 52 R.P.R. (5th) 319, at paras. 43 to 46. To create a valid lease, the parties must agree on the following essential terms: the parties to the lease; a description of the leased premises; commencement of the lease; duration of the term; rent; and all the materials of terms of the contract not being matters incident to the relation of landlord and tenant, including any covenants or conditions, exceptions or reservations: Brownlee, at para. 51; 1175777 Ontario Ltd. v. Magna International Inc. (2006), 57 R.P.R. (4th) 215 (Ont. S.C.), at para. 98, citing with approval Canada Square Corp. v. Versafood Services Ltd. (1981), 1981 1893 (ON CA), 34 O.R. (2d) 250 (C.A.), quoting Williams, Canadian Law of Landlord and Tenant, 4th ed. (1973), at p. 75.
[35] Viewed objectively, I find that Mr. Baddad and Mr. Amiri did not agree on the rent or the duration of the term for a new lease on July 15, 2019. Instead, I find that they agreed to continue the month-to-month tenancy at the combined monthly rate of $3,300 for the storefront and the upstairs space.
[36] I agree that Mr. Baddad commenced paying the new rent rate as of August 1, 2019, and that Mr. Amiri accepted this money. This is some support for Mr. Baddad’s evidence that the parties entered a new lease on July 19, 2019. However, many other factors weigh against this evidence.
[37] First, it seems unlikely that the parties would have agreed on such a lengthy term (ten years plus an option to renew for another ten years) in the short meeting that Mr. Baddad describes. This also applies to the somewhat complicated and modest rent increase structure Mr. Baddad describes (a three-year rent freeze followed by rent increases not to exceed 1.5% per year). I accept Mr. Amiri’s evidence that he was not experienced with leases and would not have entered into a binding commitment, much less one of this length, on the spot without first seeking the advice of a lawyer or paralegal.
[38] Second, the agreement Mr. Baddad describes is entirely at odds with Mr. Amiri’s unchallenged concern that he was worried about servicing his mortgage on rent levels that were too low. The agreement described by Mr. Baddad would have locked Mr. Amiri into an agreement that would have contained the opposite of the deal terms he wanted.
[39] Third, there is no contemporaneous documentation, or even subsequent documentation to support Mr. Baddad’s assertion that they reached an agreement on that day. Mr. Baddad never confirmed the terms of the agreement in writing or even wrote to protest that the parties had reached a lease in 2019, even when presented with the draft written lease in August 2021. Both Mr. Amiri and Mr. Mahavalirajan describe ongoing negotiations with Mr. Baddad as he attempted to negotiate a lower lease rate for the written lease. Neither of them recall Mr. Baddad taking the position that there was a lease agreement already in place.
[40] I find that Mr. Baddad has not presented clear and cogent evidence to demonstrate on a balance of probabilities that the parties entered into a ten-year lease on July 19, 2019. I find that the parties never entered into a lease agreement to replace the lease that expired in 2018. Instead, the parties maintained a month-to-month tenancy on the terms of the 2013 lease, at a new monthly rent figure as of August 2019, until December 14, 2021, when Mr. Amiri locked the applicants out of the premises.
[41] I am not relying on the requirement in the Statute of Frauds, R.S.O. 1990, c. S.19, s. 2, that leases be reduced to writing to be enforceable. I find that the parties never reached an agreement on a new lease.
Issue Two: Bill 229 did not prevent Mr. Amiri terminating the lease
[42] The applicants submit that Mr. Amiri could not terminate their lease and re-enter the premises because of the provisions of Bill 229, the Protect, Support and Recover from COVID-19 Act (Budget Measures), 2020, S.O. 2020, c. 36, which received Royal Assent on December 8, 2020. Schedule 5 of Bill 229 re-enacted Part IV of the Act, to provide temporary protection for certain commercial tenants. These amendments proclaimed a non-enforcement period from December 8, 2020, until December 8, 2022. The applicable sections of Part IV are as follows:
81(1) Despite anything in this or any other Act, a judge shall not order a writ of possession that is effective during the non-enforcement period that applies in respect of a tenancy referred to in subsection 80 (1) or (2) if the basis for ordering the writ is an arrears of rent.
(2) Subsection (1) applies in respect of an action or application that was commenced before, on or after the day the applicable non-enforcement period begins.
82 No landlord shall exercise a right of re-entry in respect of a tenancy referred to in subsection 80 (1) or (2) during the applicable non-enforcement period.
83(1) If a landlord exercised a right of re-entry during the period that begins on October 31, 2020 and ends immediately before the day subsection 1 (1) of Schedule 5 to the Protect, Support and Recover from COVID-19 Act (Budget Measures), 2020 comes into force, the landlord shall, as soon as reasonably possible,
(a) restore possession of the premises to the tenant unless the tenant declines to accept possession; or
(b) if the landlord is unable to restore possession of the premises to the tenant for any reason other than the tenant declining to accept possession, compensate the tenant for all damages sustained by the tenant by reason of the inability to restore possession.
(2) If a landlord restores possession of a premises to a tenant under subsection (1), the tenancy is deemed to be reinstated on the same terms and conditions unless the landlord and the tenant agree otherwise.
- No landlord shall, during the applicable non-enforcement period, seize any goods or chattels as a distress for arrears of rent in respect of a tenancy referred to in subsection 80 (1) or (2).
[43] Subsection 80(1) of the Act indicates that the provisions in ss. 81 to 84 only apply to landlords who received, is receiving, or was eligible to receive assistance under the Canada Emergency Commercial Rental Assistance for small businesses program. Subsection 80(2) states,
80(2) This Part applies to a tenancy that satisfies the prescribed criteria. However, sections 83 and 85 apply, with prescribed modifications, in respect of those tenancies only if so provided by the regulations.
[44] The applicants submit that they are a prescribed tenancy for the purposes of s. 80(2) of the Act. That subsection states:
2(1) The following criteria are prescribed for the purposes of subsection 80 (2) of the Act:
The tenant has been approved to receive the Canada Emergency Rent Subsidy.
The tenant has provided proof of the approval referred to in paragraph 1 to their landlord.
Not more than 12 weeks have passed since the day the tenant was approved.
[45] The parties called a significant amount of evidence at trial on the question of whether or not the applicants had provided Mr. Amiri with notice that the tenant had been approved to receive CERS. The dispute centred on whether or not Mr. Baddad and his daughter delivered documents related to the applicants’ receipt of CERS benefits and application for further benefits to Mr. Mahavalirajan on November 30, 2021.
[46] Mr. Baddad testified that he dropped off the documents at Mr. Mahavalirajan’s office on that day. The respondent emphasized that this information was not contained in Mr. Baddad’s affidavit and that I should not accept his evidence on this point.
[47] Ms. Baddad testified that she accompanied her father to Mr. Mahavalirajan’s office on that day, that he explained to her that the visit was very important and that he did not trust Mr. Amiri or Mr. Mahavalirajan. For that reason, she made a video recording of the interaction at the office. I found Ms. Baddad to be an impressive witness. She testified very carefully, making clear the limits of her knowledge and her ability to observe. I found her evidence to be very credible and gave it much weight. On the most important point, Ms. Baddad candidly acknowledged that she could not state with certainty what documents were in the bundle of documents that she and her father took in the car to Mr. Mahavalirajan’s office.
[48] Both Mr. Mahavalirajan and Mr. Amiri gave evidence that they did not receive documents in November 2021 indicating that the applicants had received CERS and had applied for further benefits.
[49] Ultimately, nothing turns on this dispute. Even assuming that Mr. Baddad delivered the proof of approval, and the applicants were otherwise a prescribed tenancy for the purposes of s. 80(2) of the Act, Mr. Amiri was permitted to re-enter the premises because the lease had expired, and he had provided notice of termination and re-entry.
[50] The protections in ss. 81 to 84 create a category of tenancy arrangements between qualifying landlords and tenants that remains intact in the event of non-payments of rent: Green Solutions Industries International Inc. v. Clarke Holdings (London) Inc., 2022 ONSC 1505, 40 R.P.R. (6th) 231, at para. 94. The statute prohibits landlords terminating leases and exercising rights of re-entry where tenants are in arrears for rent.
[51] The Explanatory Note provided by the Legislative Assembly of Ontario that accompanied Bill 229, highlights that these provisions are geared towards rental payment issues. It states, with respect to the amendments to the Commercial Tenancies Act, that:
Judges are prohibited from ordering a writ of possession that is effective during the applicable non-enforcement period if the basis for ordering the writ is an arrears of rent. As well, the amendments prohibit landlords from exercising a right of re-entry and from seizing any goods or chattels as a distress for arrears of rent during the applicable non-enforcement period.
[52] Mr. Amiri did not terminate the tenancy because the applicants were in arrears of rent. The parties agree that as of December 12, 2021, the applicants were fully paid up. Mr. Amiri terminated the tenancy because the lease had expired in 2018 and the applicants refused to enter into a new lease on terms acceptable to him. Nothing in the statute prevents a landlord from re-entering premises upon proper notice after the expiration of a lease. The protections provided by Bill 229 are limited to situations when the tenant is in arrears of its rental obligations: Green Solutions, at para. 94.
[53] I dismiss the applicants’ request for relief on this basis.
Issue Three: the applicants are not entitled to relief from forfeiture
[54] The applicants seek relief from forfeiture of the leased premises. Subsection 20(1) of the Act, states that when a commercial landlord is enforcing a right of re-entry or forfeiture, whether for non-payment of rent, or for any other cause, the commercial tenant may apply to this court for relief,
having regard to the proceeding and conduct of the parties under section 19 and to all the other circumstances, the court thinks fit, and on such terms as to payment of rent, costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future as the court considers just.
[55] In addition, I have authority to grant relief against forfeiture on such terms as to compensation or otherwise as are considered just, pursuant to s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
[56] Relief from forfeiture is a discretionary remedy and is not granted as a matter of course. Relief from forfeiture is very much the exception and will be granted only where the party seeking that remedy clearly makes the case that forfeiture would be an inequitable and unjust order in all the circumstances. This is particularly so with respect to a commercial lease: Rahawanji v. Gwendolyn Shop (1973) Ltd., 2011 ONCA 771, at paras. 2 and 3; Ontario (Attorney General) v. 8477 Darlington Crescent, 2011 ONCA 363, 279 O.A.C. 268, at para. 93.
[57] There can be no relief against forfeiture in the case of a termination of a monthly tenancy as the tenant has not forfeited anything: Archibald v. Richardson, 1946 CarswellOnt 342 (C.A.). If there is no lease in existence, relief against forfeiture is not available: Spiegel v. Modernage Furniture Ltd., 1971 689 (ON CA), [1972] 1 O.R. 625 (C.A.), at p. 626; Affiliated Realty Corp. v. Sam Berger Restaurant Ltd. (1973), 1973 438 (ON SC), 2 O.R. (2d) 147 (S.C.), at para. 33.
[58] As the authors of Anger and Honsberger Law of Real Property, 3rd ed. (Aurora, Ont: Canada Law Book, 2006), state at para. 7.38:
“Re-enter” in the sense used in the legislation in reference to relief from forfeiture means to re-enter during the term of the lease and “forfeiture” implies that the tenant lost something, viz., the rest of the term. Therefore, where the tenancy is one from month to month and a notice is given to the tenant terminating the tenancy there is nothing to restore to the tenant since the effect of granting relief from forfeiture is to restore the lease.
[59] I have found that the tenancy was one from month to month since the lease expired in 2018. When Mr. Amiri re-entered the property in December 2021, he did not do so during the term of the lease. The court cannot grant relief from forfeiture to restore a lease that has expired.
[60] I dismiss the applicants’ request for relief from forfeiture.
Conclusion and costs
[61] For the reasons given above, the application is dismissed.
[62] If the parties are not able to resolve costs, the respondent may deliver its costs submission of no more than five double-spaced pages to be emailed to my assistant on or before October 11, 2022. The applicants may deliver a single responding submission of no more than five double-spaced pages on or before October 18, 2022. No reply submissions are to be delivered without leave.
Robert Centa J.
Released: October 3, 2022
COURT FILE NO.: CV-22-00675756-0000
DATE: 20221003
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Al-Waleed Salon Inc. and Kamal Baddad
Applicants
– and –
Asad Amiri
Respondent
REASONS FOR JUDGMENT
Robert Centa J.