A standard provision of most commercial leases requires a tenant to comply with all legal authorities in relation to the tenant’s use of the leased premises. In Dimitri’s Service Centre Inc. v. Ocean Sands Developments Limited, the Ontario Superior Court of Justice recently held that where a tenant carried on certain automotive operations without the necessary governmental approval, the landlord had the right to terminate the lease and obtain vacant possession of the leased premises.
In Dimitri’s Service Centre Inc., the tenant leased the subject premises for the purpose of operating an automotive service centre. Approximately 1 year after entering into the lease, the tenant sought to expand its use of the premises to operate a tire shredding business. However, the tenant failed to apply for a Certificate of Approval from the Ministry of the Environment which was required for the tenant’s new operation. The Landlord sought to restrain the Tenant from continuing to shred tires on the leased premises. As a result, the Tenant commenced an action against the Landlord for an injunction prohibiting the latter from interfering with its quiet enjoyment of the premises, and alternatively, sought damages for wrongful termination of the lease.
The landlord’s concerns regarding the tenant’s tire shredding operation were not unwarranted: the landlord was advised by its insurer that the latter would not continue to insure the leased premises if a tire shredding operation was performed thereon given the inherent environmental risks arising from such an operation. Further, the lease in this case provided that where the tenant defaulted on any provision thereunder for a period of 10 consecutive days after receiving notice from the landlord of the default, the landlord was entitled to re-enter the premises forthwith, without any notice to the tenant. By failing to comply with “all legal authorities” in operating its tire shredding business, the tenant was in default of the the lease. In the result, the Court determined that the Landlord actions in re-entering the leased premises and preventing the tenant from continuing its tire shredding operations were lawful.
In Dimitri’s Service Centre Inc., the tenant leased the subject premises for the purpose of operating an automotive service centre. Approximately 1 year after entering into the lease, the tenant sought to expand its use of the premises to operate a tire shredding business. However, the tenant failed to apply for a Certificate of Approval from the Ministry of the Environment which was required for the tenant’s new operation. The Landlord sought to restrain the Tenant from continuing to shred tires on the leased premises. As a result, the Tenant commenced an action against the Landlord for an injunction prohibiting the latter from interfering with its quiet enjoyment of the premises, and alternatively, sought damages for wrongful termination of the lease.
The landlord’s concerns regarding the tenant’s tire shredding operation were not unwarranted: the landlord was advised by its insurer that the latter would not continue to insure the leased premises if a tire shredding operation was performed thereon given the inherent environmental risks arising from such an operation. Further, the lease in this case provided that where the tenant defaulted on any provision thereunder for a period of 10 consecutive days after receiving notice from the landlord of the default, the landlord was entitled to re-enter the premises forthwith, without any notice to the tenant. By failing to comply with “all legal authorities” in operating its tire shredding business, the tenant was in default of the the lease. In the result, the Court determined that the Landlord actions in re-entering the leased premises and preventing the tenant from continuing its tire shredding operations were lawful.
This case highlights the importance to both landlords and tenants regarding the activities carried on in leased commercial premises. Landlords have a clear interest in knowing the nature of their tenants’ commercial activities they may be refused insurance on their premises for certain high risk activities. Similarly, tenants must be diligent to ensure that their activities do not contravene any statutory or regulatory requirements, given that most commercial lease agreements require that a tenant comply with all legal authorities.
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