Tenant Missed Deadline for Renewal Option – Negotiations with Landlord Irrelevant

A recent Ontario Court decision revisits the question of the sufficiency of a renewal notice in a commercial tenancy, in circumstances where the tenant claimed it was led to believe the landlord would not be strictly exercising its rights.

The tenant, Rinaldo Hair Stylist Limited (“Rinaldo”) had entered into a 10-year commercial lease which was coming to the end of its term. The lease terms included an option to renew, but stipulated that such option could only be exercised if Rinaldo delivered written notice of its intention to the landlord bcIMC Realty Corporation (the “Landlord”) by May 31, 2007.

Both before and after that deadline, the parties had engaged in negotiations for a 10-year renewal on expanded lease space. However, those negotiations eventually came to a halt when they were unable to come to terms.

Meanwhile, Rinaldo let the May 2007 deadline pass without giving the Landlord the requisite written renewal notice. This was despite the fact that the Landlord had reminded Rinaldo of its renewal right in writing on several occasions prior to the expiry of the time limit.

Eventually, the Landlord wrote to Rinaldo advising that it considered the lease terminated, and demanded vacant possession. This resulted in a dispute which the parties brought to court for resolution.

Rinaldo conceded that it had technically failed to give the requisite notice by the deadline. However, it claimed that the Landlord’s participation in negotiations both before and after, together with its written reminders to Rinaldo, amounted to a waiver of the Landlord’s right to insist on the strict renewal notice requirements under the lease, as well as a breach of good faith.

The court disagreed. It found that there was nothing in the Landlord’s conduct to imply that it was not expecting Rinaldo to strictly comply with its notice obligations. To the contrary, the series of letters from the Landlord and its agent, expressly addressing Rinaldo’s obligations in this regard, were evidence to the contrary.

As such, the court concluded that there was neither an express nor implied waiver of the Landlord’s notice rights in these circumstances. Citing the principles established by the 1993 Ontario Court of Appeal decision in 120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd., the court observed as follows:

“The case law is now settled that the exercise of an option must be done in a manner which is clear, explicit, unambiguous and unequivocal. … It is not sufficient that the parties engage in a dance with each other; it is necessary that the optionee declare his intentions.”

In this case, the written exchange between the parties after the deadline had passed were negotiations outside Rinaldo’s renewal options; once the deadline had passed, the court said it was a “new ball game” between them. Furthermore, there had been no breach by the Landlord of its duty to negotiate in good faith: while it was true that negotiations had continued, the parties were very far apart on the terms and were nowhere near achieving a “meeting of the minds.” The Landlord was entitled to pursue its own business interests as long as it did not make misrepresentations to Rinaldo in the process.

Accordingly – and absent a proper notice of renewal by Rinaldo – the Landlord was within its rights to terminate the discussions and request vacant possession at the end of the lease term.
The court granted the Landlord’s motion for summary judgment. See Rinaldo v. bcIMC, 2012 (ONSC).