Occupancy of Premises

Where an offer to lease is silent on who has the onus to determine if the property complies with all laws (e.g. zoning bylaws, health and safety laws etc.), and whether the tenant’s use is permitted at the premises, then a March 2011 New Brunswick case, will be useful for guidance. Here are the case facts:

In 2005, the parties signed an offer to lease (“OTL”) for premises in a recently constructed strip mall for a two-year term. It provided that management fees and taxes were part of annual rent, but all other costs were additional rent for the tenant’s account. The OTL stated it was binding but was subject to signing a formal lease and tenant solicitor approval.

The tenant took possession without a formal lease. A few days later, it received a draft lease that made it responsible for “installation and/or improvement” costs required by governmental authority. This was not in the OTL. The tenant made inquiries and the fire department advised that occupancy was subject to installation of a fire alarm and sprinkler system costing about $10,000. The landlord told the tenant the cost was for the tenant as “additional rent" under the OTL. Lease negotiations ensued but no agreement was reached.

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