Commercial Landlord's Eviction of Tenant Restrained

A commercial tenant leased premises from the landlord for $8 per square foot.  The lease stated that under some conditions, the tenant was entitled to renew for another five years, with renewal rent to be agreed “by reference to prevailing rental rates for similar space in similar area in which the premises is situated.”

Near the end of the original term, the tenant notified the landlord that it wanted to exercise the option to extend the term for five years. The landlord replied that it “might not renew the leases”, but that if it did, the rent would be $28 per square foot, taking into account the going rate for similar commercial units in the area. As compared to the original rate, this would increase the rent by more than threefold.

Not surprisingly, this sparked a dispute between the parties.  The landlord offered to compromise with $18 per square foot, failing which the tenant had 40 days to vacate. The tenant countered with $15 per square foot. After some further back-and-forth, the landlord delivered a notice of termination. It agreed to continue some discussion with the tenant, while letting the notice of eviction stand.  But shortly before the 40 days expired, the landlord signed a six-year lease with another business for $24 per square foot, to commence in early 2020.  It took steps to proceed with the existing tenant’s eviction process.

In response, the existing tenant brought an urgent court application for an interlocutory injunction, to prevent the eviction from taking place.

In all the circumstances, the court sided with the tenant and granted the injunction.

When assessing these facts against the established test for an injunction, the court noted that all criteria were met. Here, there was at least one serious issue to be tried: it was whether the parties had agreed to a net rental rate for the renewal period. There would also be irreparable harm if the existing tenant was evicted, since it would suffer severe business losses, go out of business, and endure the destruction of its competitive position and reputation.

Neither of these could be adequately compensated for in damages.  With that said – and while evidence showing that a party will be put out of business if the injunction is not granted is typically sufficient to establish “irreparable harm” – the fact that the tenant waited until the very last minute to seek the injunction meant that it had met the test by only the “slimmest of margins”, as the court put it.

Finally, the court ruled that the balance of convenience favoured the tenant: if the injunction was not granted, the tenant would be evicted without having secured new premises – even though it had no explanation as to why it could not have done so much earlier.

In the end, the court granted the interlocutory injunction and pending a further court hearing to resolve the core dispute, ordered the tenant to pay $24.75 per square foot in rent, until otherwise ordered by the court. See Narwhal International Limited v. Teda International Realty Inc., 2019 ONSC 7494.