In the landmark 2024 Ontario Court of Appeal case Pinnacle International (One Yonge) Ltd. v. Torstar Corporation (2024 ONCA 755), the Court addressed several important issues regarding contractual rights in lease and sublease agreements.

This case provides important guidance for understanding commercial real estate leases, particularly with respect the extent to which the factual matrix should be considered when examining leases and subleases, the importance of defining key terms when drafting contracts, and the applicability of the Limitations Act and the Real Property Limitations Act.

Clarity in Drafting

In commercial real estate leases, it is crucial to define key terms and concepts with precision to avoid ambiguity regarding their meaning. In this case, ambiguity over the terms “profit” and “reasonable costs” were key to the dispute.

The Court’s ruling demonstrates that parties should be crystal clear in the lease agreement about which party benefits from these profits, the timing of such benefits (e.g., throughout the entire lease term, including or excluding applicable fixturing periods), and the specific inclusions or exclusions in the calculation of net profits.

The Importance of the Factual Matrix

The Court reiterated that, when interpreting leases (or other commercial contracts), it is critical to examine the factual background known to the parties at the time the contract was formed. This goes beyond a purely textual analysis and ensures that contractual interpretation reflects the actual circumstances surrounding the contract’s drafting and execution. In this case, the majority emphasized that the factual matrix—including the knowledge that the third-floor open-air space was unusable—was crucial in interpreting the lease provisions.

Applicable Limitation Period

Another important aspect of this case was the application of the appropriate limitation period for claims under the lease. Payments arising from a lease that are not strictly considered “rent” (even if the contract defines them as such) may be governed by the two-year limitation period under the Limitations Act, as opposed to the six-year period under the Real Property Limitations Act. This decision highlighted the risk that, even when payments are labeled as “rent,” courts may classify them differently, affecting the applicable limitation period.

BRIEF OVERVIEW OF THE CASE

Torstar Corporation (“Torstar”) occupied the commercial building at 1 Yonge Street from 1971 to 2022 under a lease agreement with Pinnacle International (One Yonge) Ltd. (“Pinnacle”). The lease required Torstar to pay Pinnacle net “profit” earned from any sublease. The key issue in this case was determining what constituted “profit.”

The building consists of two connected sections: (1) a 25-storey office tower and (2) a six-storey “Podium,” including a three-storey open-space warehouse. The third floor of the warehouse, which was central to the dispute, included both a usable office space (46,707 sq. ft.) and an open-air space (18,827 sq. ft.).

Article 8.1 of the lease permitted Torstar to sublet the space, but any profit from subletting—after deducting “reasonable costs”—was to be passed on to Pinnacle as additional rent.

In July 2011, Torstar entered into a sublease with College Boreal, which terminated in August 2020. The sublease specified a rentable area of approximately 46,707 sq. ft. for the third-floor office space, excluding the open-air portion of the warehouse. However, Torstar continued paying rent on the entire 65,534 sq. ft. of the third floor, including the open-air space, which neither Torstar nor Boreal could use.

Despite Torstar incurring a $2.6 million loss on the sublet premises, Pinnacle alleged that Torstar had profited from the sublease and sought to recover $1.1 million in profit.

This claim was based on the fact that Torstar charged Boreal more per square foot for the usable portion of the space than what was stipulated in the original lease. However, Torstar provided the following chart in its materials, which demonstrates that the total rent Torstar paid to Pinnacle for the entire third floor was always greater than the total rent Torstar received from Boreal. The chart outlines the gross rent (Basic plus Additional Rent) Torstar paid to Pinnacle for the third floor of the building during the Boreal sublease period. The gross rent ranged from $19.15 to $21.89 per square foot, paid on 65,534 square feet, including the third-floor Open Air Space. It also shows the gross rent Boreal paid Torstar, which ranged from $24.91 to $26.99 per square foot, paid on the 46,707 square feet of usable third-floor space. 

The motion judge ruled in favor of Pinnacle, requiring Torstar to pay the $1.1 million. The judge held that article 8.1 of the lease did not allow Torstar to deduct the full rent it paid for the third floor as a “reasonable cost” in determining whether it had profited from the sublease.

The decision was subsequently appealed, with the Ontario Court of Appeal addressing two main issues:

1. Whether the third-floor open-air space could be included as a reasonable cost deductible from profit in the lease.

2. Which limitation period applied to the claim for net profits.

THE ONTARIO COURT OF APPEAL’S DECISION

The Court allowed Torstar’s appeal, ruling in favor of the tenant. The Court accepted that the third-floor open-air space was part of the sublease rented to College Boreal and should be included as a reasonable cost deductible from profit under article 8.1 of the lease.

The majority identified three major errors in the motion judge’s decision:

1. The Factual Matrix: The majority emphasized that when interpreting the lease, courts must look beyond the bare text to consider the factual background known to the parties. When Torstar and Boreal entered into the sublease, it was clear that the third-floor open-air space was inaccessible, and neither Torstar nor Boreal could use it. Despite this, Torstar was obligated to pay rent for the entire third floor. It would not have made commercial sense for Torstar to sublet only the usable portion of the third floor.

2. The Sublease as a Whole: The majority held that the motion judge erred in not considering the sublease in its entirety. Viewed in light of the factual matrix, the sublease applied to the entire third floor, and the rent should have been calculated based on the usable portion.

3. Commercial Absurdity: Excluding the full rent paid for the third floor from the calculation of profit created a commercial absurdity. Requiring Torstar to pay Pinnacle $1.1 million when Torstar had incurred a $2.6 million loss on the sublease was unreasonable. The majority maintained that “profit” should be understood in its ordinary and grammatical sense as “the excess of returns over expenditure.”

Additionally, the majority ruled that the Limitations Act applied to the claim for net profit under Article 8.1, overturning the motion judge’s decision.

In Ontario, two primary statutes govern limitation periods: the Limitations Act and the Real Property Limitations Act. The Limitations Act provides general timeframes for most claims, while the Real Property Limitations Act sets specific periods for real property matters.

The Limitations Act has a basic two-year limitation period, starting from the day the claimant discovered, or should have discovered, the claim. An ultimate limitation period of 15 years also applies, regardless of when the claim was discovered.

On the other hand, the Real Property Limitations Act has a six-year limitation period for arrears of rent. However, this does not apply in all cases, such as when there is an action for redemption by a mortgagor or claims involving prior mortgagees in possession of land.

In this case, the claim was “not based on an obligation to pay rent” as defined in the Real Property Limitations Act but for a breach of a lease term. Therefore, the majority determined the two-year limitation period under the Limitations Act should apply, as Torstar was required to pay Pinnacle net “profit,” not rent.

CONCLUSION

In Pinnacle International (One Yonge) Ltd. v. Torstar Corporation, the Ontario Court of Appeal reinforced the significance of clear contract drafting, the role of the factual matrix in interpretation, and the importance of understanding limitation periods in lease disputes. The case serves as a cautionary tale for landlords, tenants, and parties to a sublease to carefully define terms and anticipate potential conflicts, ensuring that commercial agreements reflect the actual circumstances and intentions of the parties involved.

The post Key Issues in Lease and Sublease Agreements – Pinnacle International (One Yonge) v Torstar Corporation appeared first on FREEDIN & ROWELL LLP.

While it is common for companies to have their data centre in a location away from their building of operation, some companies may choose to have their data centre, or a portion of it, within the building the operate from. Landlords and tenants must be conscious of provisions in a lease which may or may not allow the premise to be used in such a manner.

1. Utilities: Data centres require vast amounts of cooling and proper airflow, which increases the demand for electricity. When leasing out a premise to a tenant who desires a data centre, a landlord must prepare for the increasing costs, and determine how to proportion it appropriately (a simple proportionate share based on rented space may not be enough). Installing a submeter to a building to appropriately gauge the electricity consumption by the tenant may be required (a cost that could be passed onto the tenant if needed)
2. Heating Ventilating Air Conditioning (HVAC): Tenants should be aware of any rights to install additional or alter existing HVAC systems to sufficiently cool the data centre facility. As stated above, data centres demand extreme amounts of power, which results in significant heat being expelled. Cooling the room will be a necessary priority to ensure that the room remains operational. Parties should be aware of any HVAC related considerations. Landlord’s should ensure that tenants are keeping the premises heated and cooled to a temperature that will regulate humidity and prevent frost.
3. Infrastructure: Though rather self-explanatory, tenants should be aware of the space required to build, support, and operate a data centre. A tenant should be aware of what parts of the premises are allowed to be utilized for such purpose and giving consideration to not overloading floors. Tenants should consult with structural engineers prior to entering into a binding agreement to lease to ensure that the flooring can sustain the weight of such equipment. Consideration must also be given to fire suppression systems and whether generators will need to be installed to mitigate the chances of power failure.
4. Financial Stability: A landlord may want to take additional precautions by reviewing the financials of prospective tenants who propose utilizing the premise as a data centre. Data centres, given their highly demanding nature, require sufficient capital to run continuously. If a tenant is unable to financially support the operation of data centre, they may not be able to perform and meet their obligations under the lease.
5. Service Level Agreements (SLAs): SLA is a contract or agreement between a service provider and a client that outlines the level of service the client can expect to receive. It defines the specific services to be provided, as well as the measurable performance standards that the service provider must meet. SLAs are commonly used in various industries, including technology, telecommunications, and outsourcing, to ensure that both parties have a clear understanding of their roles, responsibilities, and expectations. Landlord and Tenant should be clear on which SLAs have been entered into to anticipate expectations for data centre uptimes. What is to happen if service is required on the power to the building (which can interrupt the power supply to the data centre). Consideration should be given to how much notice is to be provided to the Tenant in the event that any utility requires maintenance.
6. End of Lease Requirements: Given the high costs of building a data centre, weight of the equipment, and space the equipment will take up, it will be important for the parties to discuss the costs and removal of such upon the lease’s conclusion.

Ultimately, allowing a premises to be used as a data centre can be a challenging, but lucrative venture for Landlords by providing tenants with a space to meet their needs. The above noted list is not meant to be exhaustive but a guideline and a nudge to think outside the box when it comes to this newly prevalent business style.

The post Leasing to a Data Centre – Considerations appeared first on FREEDIN & ROWELL LLP.

In a press release from September 14th, 2023, the Prime Minister’s Office (the “PMO”), previewed what they wanted to use their forthcoming amendments to Section 90.1 of the Act. The PMO stated they had a particular interest in targeting large grocery stores who prevent smaller competitors establishing nearby. This takes direct aim at exclusivity clauses often found in commercial lease agreements. Large tenants, such as any of the major grocery chains, have significant bargaining power due to their size and financial liquidity to allow them to secure such clauses. Through this new amendment, the Government hopes to remove this security blanket moving forward.

However, the PMO’s office never stated that these updates solely targeted grocery stores, and the proposed amendment reflects that intention. The proposed amendment states:

“If the Tribunal finds that a significant purpose of the agreement or arrangement, or any part of it, is to prevent or lessen competition in any market, it may make an order under subsection (1) even if none of the persons referred to in that subsection are competitors.”

Theoretically, this amendment can be applied to any lease that has an exclusivity clause in it that stifles competition (E.g. from major fast-food chains who often negotiate exclusivity clauses into their leases as well). This is because while the landlord and the tenant may not be competitors, the exclusivity clause seeks to stifle competition in the market. As such, Landlords and Tenants are captured by the new definition. 

It seems the Federal Government may have drawn its inspiration from the United States Anti-Trust laws found under 15 U.S.C §§ 1-38. Better known as the Sherman Anti-Trust Act (the “Sherman Act”) of 1890, §1 states, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal”.

From a practical perspective, it will be the task of the Canada Competition Bureau to test and contour the new boundaries of this amendment. By looking to the United States again for inspiration on enforcement, §1 violations under the Sherman Act generally fall into two categories: 1) Per Say violations; and 2) “rule of reason” violations.  Per Say violations are simple as they are obviously anti-competitive prima facia. There is no defence available to these violations. Meanwhile, the Rule of Reason involves a more fact-specific inquiry, as to the intent of the agreements and their desired results.

Like in the US, Bill-56 will likely not mean the end of exclusivity clauses for leasing, that would potentially infringe on freedom of contract rights. However, it will be interesting to see if the proposed amendments to the Act force exclusivity clauses in general to be more narrowly tailored. The proposed regulations have the potential to generate measurable change in areas of the retail and franchise spaces. Through these amendments, lawyers will have the opportunity to be more creative in securing competitive spaces for their clients, and their businesses. That being said, lawyers may have to consider not just how their agreements appear prima facia, but in their intent as well.

The post Shopping for Competition: New Proposed Amendment to the Competition Act Affecting Commercial Leases appeared first on FREEDIN & ROWELL LLP.

At the time of writing this article, the Ontario government has revealed little information as to how it will disentangle Toronto, Brampton and Caledon from fifty years of integration other than its intention to do so.  With the introduction of several ambitious pieces of legislation addressing housing affordability and supply over the last twelve months, it is clear that the Act is another piece of the Ontario government’s plan to reduce bureaucratic costs and red tape to meet the stated goal of 1.5 million new homes by 2031.

This article summarizes the Act and its potential impacts on the delivery of core services to the citizens of Toronto, Brampton and Caledon, with a particular emphasis on development approvals and new home construction.

The History of the Region of Peel

The Region of Peel was established in 1974 by the Progressive Conservative government to consolidate municipal service delivery to the newly amalgamated cities of Toronto, Brampton and Peel.[1] The Region was given responsibility for policing, health programs, waste collection, water and water treatment, road maintenance, and some land-use planning. In 1974, the three municipalities had a combined population of approximately 250,000 people and may not have been equipped to manage service deliver on their own. Since 1974, Brampton and Toronto have experienced tremendous economic growth through a massive influx of people to the Region and are mature cities with institutional capacity. Today, the Region of Peel has a population of over 1.5 million people with a forecasted population of close to 2 million people by 2041.[2]  The time is right for the three municipalities to become masters of their own destinies.

The Hazel McCallion Act

The Act establishes the framework for dissolving the Region of Peel and continuing the cities of Toronto and Brampton and the Town of Caledon as single-tier municipalities with full authority for administering land-use planning and delivering core services. The effective date of dissolution is January 1, 2025 and until such time the Region of Peel will continue to have a mandate and authority as an upper-tier municipality. The Act establishes a transition board appointed by the Minister of Municipal Affairs and Housing consisting of five members that will monitor the actions and decisions of the local councils and provide recommendations to the Minister regarding the restructuring necessary to enable a seamless devolving of power to the three municipalities. These duties will include such matters as winding down the financial operations of the Region, transferring assets, assigning liabilities, debts and other financial obligations, allocating regional services to the local municipalities and ensuring long-term economic sustainability as single-tier municipalities. The names of the members of the transition board are expected to be released in the next few weeks.[3]

The Act grants the transition board significant power over the Region and the three municipalities, including requiring the municipalities to share any documents, records or information in its possession, including privileged or confidential information, in order for the transition board to fulfil its mandate.  Further, until January 1, 2025, the Region and the local councils of the three municipalities must “when considering entering into any transaction, commitment or agreement…act in the public interest having regard to the municipal restructuring…including acting in a manner that does not unreasonably impact another municipality”.[4] If the transition board is of the opinion that the Region and the three local councils have made decisions or acted in a manner that is not in the public interest, the transition board, or alternatively the Minister may direct (or as a last resort) order the local council to not proceed, undo or alter the decision, transaction or agreement entered into by the local municipality.[5]

As is the case with most legislation, the Act is scant on details with the regulations containing the operational and administrative impact of the legislation. The Act suggests that regulations concerning the set up of municipal service boards, parameters for the transfer of regional assets, and allocation of debts, liabilities and obligations are forthcoming. If the public statements of the three mayors are any indication, the disentangling of the three municipalities will be a challenge. The Act gives the transition board the legal authority to push through any dispute, challenge or roadblock the local councils and mayors of the three municipalities may throw its way so the Region of Peel can be dissolved by January 1, 2025. 

New Housing in Toronto, Brampton and Caledon

The Act will have a profound impact on the delivery of new housing to the three municipalities. With the dissolution of the Region of Peel, the cities of Toronto and Brampton and the Town of Caledon will become single-tier municipalities (like Toronto, Hamilton and Ottawa for example), and therefore be sole approval authority for official plans, official plan amendments, subdivisions, site plans and all other development applications. Under the current system, the Region of Peel is an upper-tier municipality with the authority and the statutory requirement to approve the official plans and official plan amendments of the lower-tier municipality, provide input on site plan applications, approve subdivision plans and the ability to appeal planning decisions. This additional level of review has added significant costs and delays to the delivery of new housing in the region, in the form of added bureaucracy and increased development application and review fees. Furthermore, the Region of Peel and the local municipalities evaluate the merits of development proposals with regard to different priorities. The two-level approval process has prevented otherwise viable and desirable development projects from proceeding.

The dissolution of the Region of Peel gives the three municipalities the authority and autonomy to make their own decisions regarding development applications. The three municipalities have collectively committed to building 246,000 new homes by 2031.[6] The single-tier municipal structure paves the way for the municipalities to deliver housing faster, cheaper and on their own terms.   

The Fall of Regional Governments in the Golden Horseshoe

With the release of the Act, the Ontario government announced its intention to appoint regional facilitators to assess the upper-tier municipalities of Durham, Halton, Niagara, Simcoe, Waterloo and York to determine whether the municipalities in these regions are capable of governing themselves and meeting the service needs of their communities as single-tier municipalities. Bill 23, More Homes Built Faster Act, which passed in 2022, defined these six regions (along with Peel) as “upper-tier municipalities without planning responsibilities” meaning that these regional governments would no longer have authority to approve or evaluate development applications previously under their jurisdiction.[7] While the legislative change is not yet in force, it is clear that the Ontario government has recognized that a two-tiered system for development approvals has resulted in increased cost for homebuilders and a bottleneck in delivery of critical housing supply. Before removing the development approval functions from the regional governments, the province will need to ensure that these municipalities have the ability to evaluate and deliver housing faster and more affordably than the regional governments.

Despite what appears to be a concerted effort by the Ontario government to end decades of regional governance, we believe regional collaboration will continue to play a critical role in local governance for years to come. Housing needs to be built faster and more affordably. Yet, Ontario cannot lose sight of the importance of building quality and livable housing; housing that is connected to transit, close to recreation and parks, education, health care, and shopping. Hundreds of thousands of people in the Golden Horseshoe cross both regional and municipal boundaries every day to get to work, see family and friends, and play. We are all connected. We all benefit from and share in the services of other municipalities. Therefore, development applications must have an eye to the broader community and local municipalities must consider not only how a development application will impact their communities, but also the communities of their visitors and neighbours.

The dissolution of the Region of Peel is expected to have significant implications on core service delivery in the municipalities. Yet, the impact on land use planning and new home construction will present the greatest challenge for the three municipalities who will be tasked with balancing the economic interests of developers with the needs of the residents and stakeholders in their communities. The Hazel McCallion Act is poised to have a lasting impact on the growth of these three municipalities for years to come.

 If you would like to discuss how the Act may impact you or your business, please contact any member of the Real Estate and Land Development group at FREEDIN & ROWELL LLP.

By Gideon Bell and Michael Murphy (summer student)

[1] https://peelarchivesblog.com/about-peel/  

[2] https://data.peelregion.ca/pages/demographics

[3] https://news.ontario.ca/en/release/1003064/ontario-announces-intent-to-dissolve-peel-region

[4] Hazel McCallion Act (Peel Dissolution), 2023, s. 5

[5] Hazel McCallion Act (Peel Dissolution), 2023, s. 6

[6] https://news.ontario.ca/en/release/1003064/ontario-announces-intent-to-dissolve-peel-region

[7] https://www.ola.org/en/legislative-business/bills/parliament-43/session-1/bill-23

The post Bill 112, Hazel McCallion Act: The End of the Regional Municipality of Peel appeared first on FREEDIN & ROWELL LLP.

In 2022, the Uniform Law Commission released its final copy of their proposed amendments to the UCC. These amendments included Article 12. This Article covers Controllable Electronic Records (“CER”) and the transfer of property rights in certain intangible digital assets. This includes electronic records that utilize distributed ledger technology such as crypto currency and Nonfungible Tokens (“NFT”).

Under the proposed §12-102 (a) (1) CER is a record stored in an electronic medium that can be subject to control under §12-105. The term excludes any controllable account, a controllable payment intangible, a deposit account, an electronic copy of a record evidencing chattel paper, an electronic document of title, electronic money, investment property or transferable record.

§12-105 of the UCC provides three additional criteria for classification. A person has control of a CER if it gives the person: (i) the power to avail itself of substantially all the benefit from the electronic record; (ii) exclusive power to prevent other from availing themselves substantially all the benefit from the electronic record; and (iii) transferable control.

The methods of securing a traditional record under Article 9 (which governs secured transactions) continue to apply. Article 12 has merely allowed CERs to be secured under Article 9 of the UCC, giving CERs legitimacy on a legislative level. The descriptions under Article 12 are intentionally vague so that the CER treatment can be applied as broadly or narrowly as required.

It is worth pointing out that in a priority dispute, perfection by control will outrank perfection by filing. This will be an important point of consideration for lenders trying to preserve their rights.

These amendments represent an important shift in the commercial law practice area because it demonstrates the importance of adapting law to the changing landscape. There have been discussions in law journals throughout the country about smart contracts and artificial intelligence being used to streamline and update an Article 9 transaction. This response by the Uniform Law Commission to amend the UCC demonstrates the need for the law to stay current with technology and to be pro-active rather than reactive to changes that are quite frankly inevitable. This ensures predictability and certainty in practice.

As of the current date, these amendments have been proposed in 22 States including California. Adoption from states such as California signals that the legal market is ready to actively utilize this new area of law. Ontario would be wise to consider updating its own laws to accommodate this market shift. Given that there are considerable cross boarder dealings between Canada and the US, business continuity should be a strong motivation for updating our PPSA.

Co-author: Adam Nangini

The post Ontario’s PPSA Future appeared first on FREEDIN & ROWELL LLP.

Starting in 2023 an annual tax will be levied on vacant Toronto residences. A property is considered vacant if it has either been unoccupied for a total of six months during the previous calendar year or it is deemed vacant under By-Law 97-2022.

The objective of the City of Toronto’s Vacant Home Tax (VHT) is to increase the supply of housing by discouraging homeowners from leaving their properties unoccupied, and compelling them to either rent or sell their vacant properties. Revenues collected from the Vacant Home Tax will be put towards affordable housing initiatives.

Declaration of Occupancy Status

Annual declaration of the status of residential properties is mandatory. Homeowners or agents of homeowners must declare the status of their properties irrespective of whether the homeowner is living at the property. The declaration will determine whether the tax applies. Principal residences may be left unoccupied for a total of six months. Failure to declare or making false declarations could result in a fine of $250 to $10,000. Failure to make an annual declaration by the deadline or to provide supporting documentation will result in the residential property being deemed vacant.

Calculation

A Toronto residence that is declared, deemed, or determined to be vacant for more than six months during the previous year will be imposed a Vacant Home Tax of one percent of the Current Value Assessment (CVA) for the following year. For example, if a property was vacant in 2022 and the CVA of a property is $1,000,000, the tax amount billed would be $10,000 (1% x $1,000,000), which would be payable in 2023.

Types of Property Status Declarations

If your property is either declared, deemed, or determined vacant, it will be subject to the Vacant Home Tax. A property can be “declared” vacant by the homeowner through their property status declaration. A property will be “deemed” vacant if the owner fails to make a property status declaration. A property that has been selected for audit or on review for a Notice of Complaint or appeal can be “determined” to be vacant upon completion of the review. Click on the following link for a complete list of different types of property status declarations.

Exemptions

Eligible exemptions from the VHT include the death of a registered owner, repairs or renovations, principal resident is in care transfer of legal ownership, occupancy for full-time employment, and a Court order. Click on the following link for a description of each exemption and the required supporting documentation.

Property Transactions

The VHT has implications for property transactions as well. Purchasers and vendors are responsible for ensuring declarations have been filed. The VHT will form a lien on the property, and any unpaid taxes become the purchaser’s responsibility. For a closing that occurs before the closing of the declaration period on February 2^nd, the vendor must complete the declaration prior to closing, and for a closing that occurs after February 2^nd, the purchaser is responsible for completing the declaration in the following year.

Audits / Notice of Complaint / Appeals

A status declaration can be selected for audit on a random or specific criteria basis. If selected, the owner will have to provide either evidence to substantiate their claim of occupancy or any exemption. If you disagree with the Vacancy Tax Notice or Supplementary Assessment, you may file a Notice of Complaint to have the city review your property’s status. Finally, if you disagree with the decision made on your Notice of Complaint, you will have 90 days to submit an appeal request.

Bottom Line

Mayor John Tory predicts the VHT to generate between $55-66 million per annum, and the tax will be enforced heavily through compliance audits. The tax will be an unwelcome sight for those who live between cities and are not here for six months, but Toronto residents can expect an increase in properties up for rent or sale. It would be prudent to file a declaration diligently and honestly as the repercussions for failing to do so are considerable.

The post Toronto’s New Vacant Home Tax appeared first on FREEDIN & ROWELL LLP.

These are the wise words of Mr. Andres Paul, one of the founders of FREEDIN & ROWELL LLP, during my first days as an Associate. We are seeing widespread redevelopment across Ontario as property values continue to soar, demand for housing and industrial space explodes, and the buildings and infrastructure that have become staples in our city centres reach the end of their useful life. This colossal redevelopment and intensification of our urban cores is being driven by city builders, developers and governments, but also on the local level by citizens re-inventing neighbourhoods and the streetscape through micro-developments, such as infill development, construction of laneway homes, and legalizing secondary dwellings. This article focuses on land severances, one of the more accessible and transparent tools available to the public to achieve intensification.

What is a land severance?

A severance is the authorized separation or division of land into one or more parcels. Severances are approved by a municipality’s committee of adjustment through a process called a “Consent Application”. Consents are required by Ontario’s Planning Act any time a property owner wishes to permanently subdivide their land into smaller parcels, adjust their lot line, create easements over part of their land, or mortgage part of their property.

Why is municipal consent necessary to sever land?

Ontario’s Planning Act was introduced in the middle of the twentieth century to respond to the indiscriminate division and development of land in the province. This piece of legislation empowered municipal governments and councils to enact policies regulating land use through a variety of planning tools, such as site plan control, official plans, and zoning by-laws. The intention of the legislation was to balance the needs of a growing population, encourage citizen participation and allow municipalities to create long-term visions for their communities. One of these tools was the creation of an independent committee of adjustment comprising citizens appointed by municipal council to evaluate proposals for minor variances to zoning by-laws and land severances.   

Today, the Consent approval process continues to evolve to meet the pressures of a growing population in need of more and better places to live, work and play. The Consent approval process ensures that land division and development is consistent with the land use planning goals of the municipality, encourages efficient use of municipal services, regulates traffic, is sensitive to the natural and built environment, and enhances the general character of neighbourhoods.

How is a Consent Application Evaluated?

The Committee of Adjustment evaluates a Consent Application based on the following criteria:

1. Does the application conform to (i.e. not contradict) the Official Plan and other land use policies of the municipality;
2. Is the proposed severance suitable for the specific parcel of land;
3. Is there adequate municipal services and utilities to service the new lot(s); and
4. Does the application conform to (i.e. not contradict) the general objectives of the Province as described in the Provincial Policy Statements

What is the municipal process to obtain a Consent?

The process to obtain a severance in Ontario generally includes the following steps:

1. Early Consultation
   The applicant should contact the Committee of Adjustment or municipal planning staff to review their proposal and determine the preliminary feasibility of the severance.
2. Application
   The applicant must complete the Consent Application and include a sketch or survey plan showing the dimensions of the property, physical structures, distances and proposed severed and retained lands.
3. Public Notice
   Notice of the proposal is circulated in the community, including to the relevant departments in the municipality, such as the transportation department, fire department, utility companies, planning department and relevant conservation authorities. The proposal is also circulated to neighbours who are directly affected by the Consent Application.
4. Application Review
   The relevant departments in the municipality have an opportunity to provide their recommendations, comments or objections to the proposal. These recommendations are provided to the municipal planner who will issue a report and recommendations to the Committee of Adjustment evaluating the merits of the application in light of the criteria under the Planning Act and the comments received from the relevant departments and members of the public.
5. Notice of Decision
   If the municipal planner’s analysis supports granting the severance, the Planner will compile of list of conditions which must be satisfied in order for the Committee of Adjustment to provide its final approval to the application. These conditions may include such requirements as conveyance of certain lands to the municipality or utility companies for public purposes, payment of certain community costs, entering into certain agreements respecting servicing of the new lot(s), and preparation of a reference plan prepared by an Ontario Land Surveyor.
6. Public Meeting
   The Application is considered at a public meeting of the Committee of Adjustment. The Consent is either approved, approved with conditions, or refused. If the applicant disagrees with the decision or any part of it, the decision may be appealed to the Ontario Land Tribunal.
7. Effecting the Severance
   

   The applicant will work closely with their lawyer, planner/architect and land surveyor to satisfy all conditions of the Committee of Adjustment’s decision (also known as Provisional Consent). Once all conditions have been satisfied, the municipality will issue a Certificate of Consent that is registered on title to the new severed lot thereby creating the severed lot’s separate existence.

   The Consent Application process can take three months to a couple years to complete depending on the complexity of the proposal, size of the lot, and the specific municipality. If the applicant wishes to appeal the decision to the Ontario Land Tribunal, naturally this process can take longer.  

   The Consent approval process plays, and will continue to play, an important part in meeting Ontario’s land use planning goals, most notably intensification and redevelopment in built-up areas. Landowners should consider whether their property may be appropriate for a severance application as the process is accessible, relatively cost-efficient, and has potential to increase the value of your property and bring greater community benefits.

   If you are considering a severance, please contact your friendly neighbourhood development lawyer.

The post Land Severances: Redevelopment at the Local Level appeared first on FREEDIN & ROWELL LLP.

Mark Twain’s old adage “Buy land, they’re not making it anymore” continues to remain relevant as we see property values increase in Ontario year over year, especially in industrial and multi-residential asset classes. Whether you are a business owner looking to divert earnings into an appreciating asset, or an individual investor seeking passive income outside of the stock market, the asset class you choose will largely depend on cash flow and recourse – both of these have their roots in statute.

In Ontario, two statutory regimes apply – one for residential tenancies and the other for commercial/industrial tenants.  These two regimes afford investor landlords radically different rights with respect to their ability to contract with tenants.

Commercial tenancies are governed by the Commercial Tenancies Act, R.S.O. 1990, whereas residential tenancies are governed by the Residential Tenancies Act, 2006, S.O.  
Below is a brief summary of how these two statutes differ.  

While the above is meant to serve as a brief comparison of the dual statutory regimes, the overarching theme is that commercial landlords are afforded far more discretion in negotiating terms, and being able to enforce their rights against delinquent tenants.

At FREEDIN & ROWELL LLP, we help buyer groups analyze and mitigate these risks. Whether you are buying beds or sheds, please do not hesitate to contact myself at 905-276-0419 or odeguerre@freedinrowell.com

The post Beds Or Sheds: What’s The Difference appeared first on FREEDIN & ROWELL LLP.

The post Know What to Expect When Purchasing A Pre-Construction Condo appeared first on FREEDIN & ROWELL LLP.

Residential real estate purchases are not always a straight-forward process. Sales can take weeks between offer, acceptance and the deal “closing”. During these uncertain times, a lot can change between signing an Agreement of Purchase and Sale (“APS”) and closing. A buyer may experience buyer’s remorse, feel they have overpaid for the property or have their financial circumstances change unexpectedly. For whatever reason, a buyer wanting to back out should realize that the process is not without risks and potentially large consequences.

With the current COVID-19 health crisis, buyers may be wondering if there is a way to use the pandemic as a force majeure (an “Act of God” or other unforeseeable circumstance) to release them from their contract.

In Ontario, most real estate agents use the Ontario Real Estate Association’s (“OREA”) standard agreement forms that contain many of the standard terms and conditions that are regularly used in a real estate transaction. A buyer hoping to rely on a clause in these OREA forms to renege on their purchase may be left disappointed. There is no built-in force majeure clause in the OREA form, nor is there a built-in clause that makes a purchase conditional upon a satisfactory inspection of the buyer.

If a buyer wants these protections, as with any protections not already contained in the  OREA form, they must ensure that the person drafting their particular OREA form includes these provisions in Schedule A, which is an additional schedule that can be included with more deal-specific terms and conditions.

Without inserting clear conditions into the APS, a buyer, and their lawyer, could be limited by the terms of the contract and how courts have interpreted similar situations.

Even if an APS contains a force majeure clause, there is a high bar to using this clause to back out of a deal. To rely on this clause a purchaser must demonstrate that the COVID-19 pandemic, or another unforeseeable event, has made it impossible to complete their obligations. A court will likely not accept an impossibility argument simply because the obligations became more expensive or difficult to fulfill.
There is not much leeway in Ontario for buyer’s looking to cancel their real estate purchase, unless very clearly provided in the agreement terms. If a buyer does decide to back out, the seller can argue that they are entitled to keep the deposit and sue the buyer for the loss in value of the property on a resale. The consequences for a buyer breaching its contract can be substantial and far exceed the initial deposit. In the 2018 Ontario decision of Bang v Sebastian, the buyer was liable for over $120,000 in damages, which included the lower resale price and extra financing charges, as a result of failing to close their purchase.
So how can a buyer avoid these pitfalls and mitigate their risks? A buyer can consider:

• consulting their lawyer before signing an APS to see if there are terms in the contract that can be added to adequately protect them from unforeseen circumstances;
• adding a clause that makes the purchase conditional on obtaining necessary financing;
• obtaining bridge financing to assist with gap between the time your existing home is sold and your new property is purchased; or
• working with the seller by negotiating amendments to the APS instead of unilaterally breaching, such as postponing closing. 

At FREEDIN & ROWELL LLP our real estate group works together with you to protect your interests and address your concerns. Please contact Ann Twigg to discuss further.This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice based on their specific situations.

The post Backing Out Of A Real Estate Deal appeared first on FREEDIN & ROWELL LLP.