My Landlord is Undergoing Renovation/Construction: What are Potential Tenant Rights and Remedies?
Introduction
Renovation and construction, while often absolutely necessary, can cause several issues for both landlord and tenant. A landlord may have obligations under a lease to renovate or maintain premises, a building or a shopping centre. In addition, a landlord may wish to renovate, remodel or expand a building or a shopping centre for the betterment of tenants and patrons alike. On the other hand, a tenant may have objections to the noise and disturbance created by such renovation or construction and the potential impact same may have on their business, occupancy and enjoyment.
Navigating these issues before they arise through careful drafting and planning is certainly the ideal manner in which to deal with renovation and construction issues. Unfortunately, often times, even with careful drafting and planning, a tenant may find themselves wondering how to best proceed when faced with a landlord's renovations and/or construction impacting their tenancy.
This paper, through the lens of relevant case law, will explore a tenant's rights with respect to renovation and construction issues and the potential remedies available. Finally, sample wording will be provided at the end of this paper to help protect a tenant's interests when entering into a lease.
Rights
The interference with a tenant's use and enjoyment of leased premises may arise due to the hindrance of access or egress to or from the leased premises or the presence of noise, dust, vibration, smells and other physical phenomenon, potentially giving rise to a claim under a number of different categories:
- a breach of the covenant of quiet enjoyment;
- a claim in nuisance against the landlord or a third party; or
- a claim that the landlord has derogated from its grant.
Quiet Enjoyment
A tenant's right to quiet enjoyment of its leased premises has been referred to as "the most basic right of a tenant."
A tenant's right to quiet enjoyment is implied at common law, and in Ontario has been codified in s. 23 of the Conveyancing and Law of Property Act4. The definition of quiet enjoyment has changed over time to include non-physical intrusions upon a tenant's leased premises. The 2019 Ontario case London Prestige Ltd. v. Wellington Harlech Centre Inc., reaffirming the BC decision in Stearman v. Powers, sets out that, "(a) landlord's covenant to provide quiet enjoyment, whether express or implied in a lease, means that a landlord must not substantially interfere with its tenant's enjoyment of the premises. To be actionable, a landlord's interference must be grave and permanent such that it renders the premises substantially less fit for the purposes for which it was leased." This definition has become the accepted standard and test for whether or not a landlord has interfered with a tenant's right to quiet enjoyment of its leased premises. It includes the hallmark qualities for quiet enjoyment in Ontario: grave, permanent and substantial interference with the tenant's enjoyment of its leased premises. Certainly, these terms are ambiguous, and their meaning varies with the case law.
A tenant's right to quiet enjoyment is implied at common law, and in Ontario has been codified in s. 23 of the Conveyancing and Law of Property Act. The definition of quiet enjoyment has changed over time to include non-physical intrusions upon a tenant's leased premises. The 2019 Ontario case London Prestige Ltd. v. Wellington Harlech Centre Inc., reaffirming the BC decision in Stearman v. Powers, sets out that, "(a) landlord's covenant to provide quiet enjoyment, whether express or implied in a lease, means that a landlord must not substantially interfere with its tenant's enjoyment of the premises. To be actionable, a landlord's interference must be grave and permanent such that it renders the premises substantially less fit for the purposes for which it was leased." This definition has become the accepted standard and test for whether or not a landlord has interfered with a tenant's right to quiet enjoyment of its leased premises. It includes the hallmark qualities for quiet enjoyment in Ontario: grave, permanent and substantial interference with the tenant's enjoyment of its leased premises. Certainly, these terms are ambiguous, and their meaning varies with the case law.
In London Prestige Ltd., the tenant plaintiff operated a car wash on leased premises and claimed damages of $1.5 million from the defendant landlord for breach of contract, primarily for loss of income resulting from the defendant's construction of several retail buildings that allegedly blocked the view of the car wash from a nearby arterial road, resulting in a loss of customers and income. In addition to the common law right of quiet enjoyment, the lease included a clause that obliged the landlord, "to place the plaintiff in peaceful and undisturbed possession of the leased premises...and the Lessor shall secure to the Lessee quiet and peaceful possession of the leased premises during the term thereof...'" The tenant plead that the landlord breached their right to quiet enjoyment before, during and after the landlord's construction by installing a concrete pad, and placing two large garbage bins on the leased premises. The court held, using the Stearman v. Powers test mentioned above, that the garbage bins and concrete pad violated the tenant's right to quiet enjoyment found in the lease. Notably, the court awarded the plaintiff nominal damages in the amount of $1,000.00 for the breach of quiet enjoyment, despite the fact that the plaintiff was unable to provide proof of damages and provided no evidence regarding the amount of loss that resulted solely from the placement of the garbage bins and concrete pad addition.
In Bloor Street Diner Ltd. v. Manufacturer's Life Insurance Co.,("Bloor Street Diner") the defendant landlord sought to renovate and redevelop the Manulife Centre, where the plaintiff tenant ran their restaurant business. The landlord's plan included first installing a "temporary" hoarding wall along the tenant's leased premises in order to then build a glass facade, which would obscure the leased premises' view from the street, extend somewhat into the leased premises itself, and substantially reduce the size of the most desirable seating in the restaurant, negatively impacting the tenant's business. Despite the landlord's assertion that they would make a significant effort to mitigate the construction's impact on the tenant's business, the Ontario Superior Court of Justice still ruled that the construction violated the tenant's right to quiet enjoyment, which was secured implicitly via common law and explicitly in the lease. The provisions that renovations should not materially affect "access to, egress from and visibility of the Leased Premises from" adjoining streets and common areas were enforced by an injunction.
Footnotes
1 Alex Kolandjian is partner in the real estate group and Joshua Prizant is a student-at-law.
2 A Commercial Tenancy Handbook, Richard Olson (Toronto: Thomson Reuters) Chapter 7, Section E(a)
3 George M. Valentini and Ken Herlin, "A Commercial Tenant's Rights and Remedies: An Overview" in Harvey M. Haber ed, Tenant's Rights and Remedies in a Commercial Lease (Toronto: Canada Law Book Inc., 2014) 10 4 R.S.O. 1990, c. C.34.
4 London Prestige Ltd v Wellington Harlech Centre Inc, 2019 ONSC 2364
5 Ibid, at 31
6 Ibid, at 30
7 Ibid, at 52
8 Bloor Street Diner Ltd v Manufacturer's Life Insurance Co, 2016 ONSC 440
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Originally published 17 August, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
