A Landlord's Duty of Care in a Commercial Lease and the Occupier's Liability Act - A Follow Up

Is a commercial landlord liable for accidents that occur on its tenant’s premises? I wrote previously about the situation under a residential tenancy where the landlord was held liable. In the commercial lease context would the same result apply in case of injury to a person? Do the same issues apply?

Landlords and tenants address the control and operation of a commercial property as one of the material issues to address when they are negotiating a lease and the obligations to maintain and repair the property is a related issue that involves both financial and legal implications.

In the 2012 Ontario case of Musselman v. 8755667 Ontario Inc., the landlord had leased premises to the tenant for the purpose of carrying on the use of a restaurant. One evening, one of the of the tenant’s customers who was dining in the premises with her family went to the bathroom in the basement.

On her way back up, she fell backwards down the basement stairs (there were no guards, and no wall and no handrail on one side of the staircase) and tragically became a quadriplegic as a result. She sued the tenant and landlord and the City for failure to ensure the stairs were safe for use.

At trial she was successful other than against the landlord as the Court found the landlord was not an “occupier” under the Occupier’s Liability Act (“OLA”).

Section 1 of the Act, provides that an “occupier” includes a person in physical possession of the premises, or a person who has responsibility for and control over the condition of the premises and the activities carried out therein.

Section 3(1) of the Act, provides that “an occupier owes a duty to take such care as in all the circumstances of the case is reasonable to see that persons entering on the premises, and the property brought on the premises by those persons, are reasonably safe while on the premises.”

Finally, Section 8(1) of the Act provides that where a landlord is responsible for repair and maintenance of the property, it is deemed to be an “occupier”.

The Lease made it clear that it was a fully net lease and the Tenant had full responsibility for the premises and controlled the persons who had access to it. The landlord did have a right in the lease to inspect the state of repair of and take any necessary steps required to maintain the premises in a state of good repair.

The plaintiff appealed in the hope of finding the landlord liable as well but the appeal Court did not agree.

The plaintiff argued that the lease contained a clause providing for inspections of the premises for repair on the landlord which meant the landlord did have control over the premises and thus make the landlord an occupier under the OLA.

However, the Court found that the lease itself was not sufficient to establish that and that the parties’ (i.e. the landlord and tenant) conduct in their relationship over the years was a significant factor and that conduct did not establish that the landlord did have the control element necessary to establish it was an “occupier”.

In particular, the court found the Landlord to have had little knowledge of and no input or control over the construction and renovation conducted by the tenant on the basement stairs which work the Tenant had carried out on its own volition.

Therefore, the Landlord owed no duty of care to the plaintiff or its patrons under the OLA so it was not liable to the plaintiff for damages.

The Lesson:

So, why was the result in this case different that the one in the residential case of Taylor v. Allard that I wrote about previously?

1. For one thing, landlords under commercial leases don’t have the same statutory duty of repair that the residential landlord has under the Residential Tenancies Act.
2. In addition, the lease language foists most repair obligations on the tenant (other than structural in many cases).
3. The degree of control a landlord exerts over a tenant is a material factor in terms of its exposure to being held an “occupier” and thereby subject to the OLA.
4. Also keep in mind that notwithstanding what the lease says, the course of conduct over the lease also has a material bearing on the issue of whether the landlord has exerted control over the condition and repair of the premises. Therefore, a landlord needs to be careful that its actions reflect the terms of the lease and don’t change the parties obligations to each other or it could end up becoming inadvertently liable under the OLA.

Disclaimer: This article is for general information purposes only and not intended as or to be relied upon for legal advice. Consult with a lawyer for your unique situation.

[*If there is a general real estate or leasing related question you would like to see addressed in a future article in “The Legal Corner”, please contact me directly by e-mail at dgold@robapp.com with your suggestion. Not all requests can be accommodated.]

As Published in Property Biz Canada on April 25, 2013.