Commercial Leases - Case Update 1

DID YOU KNOW?

A. That interest on renewal rent determined by arbitration is not payable from the commencement date of the renewal term but only from the date of the award unless the lease states otherwise.

B. That (i) leases of part of a building for 21 years or more do not require Planning Act consent? (ii) If the remainder of a lease term plus renewals can exceed 50 years, Land Transfer Tax is payable on an assignment of

the lease pursuant to the Land Transfer Tax Act?

C. That tenant's Insurance should be reviewed prior to the commencement date and thereafter annually?

D. That an amalgamation is not an assignment or transfer requiring landlord's consent unless the lease so provides?

A. INTEREST ON ARBITRATION AWARDS FOR RENT:

In the recent decision of the Corporation of the City of Toronto vs. Toronto Terminals Railway Company 45 O.R. 3rd, 41, the Court of Appeal dealt with the issue of interest on an arbitration award for the determination of rent for a renewal term.

Facts:

This case was in the public eye for some time since it involved the City's lease to the TTR of the Union Station pursuant to a series of 21 year leases commencing in 1905. The rent for each lease renewal term was to be as agreed by the parties or as set by arbitration. None of the leases entered into by the parties (in 1905, 1926 and 1947) made any provision for interest on any rent increases determined by arbitration. The parties could not agree on the rent for the lease term from 1968 to 1989 and the matter was submitted to arbitration. There were a number of delays prior to going to arbitration while the City considered a redevelopment proposal for the land. The parties subsequently signed an arbitration agreement stating that the issue to be arbitrated was the annual rent to be paid for the 1968 lease term. The arbitrators determined such annual rent and the City claimed interest on the difference between the old rent paid by TTR and the new rent determined by arbitration from the commencement of the renewal term. The arbitrators relied on prior case law in holding that the rent determined by arbitration was not due until it was determined and they did not have jurisdiction to award interest. The City appealed to the Divisional Court and lost and then appealed to the Court of Appeal.

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