Thursday, July 17, 2008

Landlord's Consent to Assign Commercial Lease

It is common for commercial leases to permit assignment with consent of the landlord provided the consent is not unreasonably withheld.



Today's Superior Court decision in Cvokic v. Belisario, 2008 CanLII 35269 (ON S.C.) discusses when withholding consent will be unreasonable.



In summary, the withholding will be unreasonable where it is motivated by a purpose collateral to ensuring the existing lease is fulfilled -- for instance to obtain a settlement of a lawsuit or to improve the terms of the existing lease.



The Court writes:



[25] The burden is on the tenant to satisfy the court that the refusal to consent was unreasonable. The question is whether a reasonable person would have withheld the consent.



[26] The landlord is not entitled to require amendments to the terms of the lease that will provide it with more advantageous terms. I find the landlord tried to do that in the facts before me. The refusal will be unreasonable if it was designed to achieve a collateral purpose or benefit to the landlord that was wholly unconnected with the bargain between the landlord and tenant reflected in the terms of the lease.



[27] I find as a fact that the landlord tried to achieve a collateral purpose by insisting on this lawsuit being dismissed before the consent would be given. This, I find, is unreasonable withholding of consent.



[28] I find that the landlord acted unreasonably because it is not conceivable to me that they would not consent to getting rid the tenant whom they thought was a thorn in their side. I find that the landlords did not want the space in question to be a perpetual pizzeria. See Exhibit #2, Tab 93, page two of two.



[29] I find that they were being unreasonable when they wanted to be able to evict on any default any option to be theirs and theirs alone. I find that John wanted to change the terms of the existing lease and wanted to limit it to a year.

84 comments:

Anonymous said...

i note your post on recent ontario sc. case .i have a fact situation in alberta where the landlord refused to concent to assign in a commercial lease unless the assingnee directors guaranteed the balance of the lesae term. hopefully litigation will not be needed. thanks for the info garry boris lawyer alberta garryboris@gmail.com

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