Canada: Case Comment: "Parsons Precast Inc. v. Sbrissa"

Last Updated: May 15 2013
Article by Jordan Hill

Following the case of RioCan Holdings Inc. vs. Metro Ontario Real Estate Limited1, the Ontario Superior Court of Justice released Parsons Precast Inc. v. Sbrissa2, another decision involving a landlord and tenant fighting over the cost of parking lot work.

The Court released Parsons, involving a similar fact situation, six months after the RioCan decision. In Parsons, Parsons Precast Inc., as tenant (the "Tenant") leased commercial space from Anna Sbrissa and Armando Sbrissa, as landlord (together, the "Landlord") in a multi-tenanted project. The lease was described as a net lease, with some of the relevant provisions regarding responsibility for repairs and maintenance being as follows:

  • "The parties hereto agree that this lease shall be a net/net lease in that the parties have agreed that this lease is a completely care-free net lease to the lessor... The lessee... shall pay its proportionate share of all expenses arising from the lessor's operation of the building in which the demised premises are located, including without limiting the generality of the foregoing, all expenses arising from... common area maintenance expenses..."3
  • "The lessee shall additionally pay monthly a proportionate share of all costs and expenses incurred by the landlord in maintaining, operating, cleaning, insuring, and repairing the property..."4
  • "The lessee will repair according to notice in writing (reasonable wear and tear, and damage by fire, lightning and tempest only excepted.)"

There was an initial three year term, beginning on November 1, 2004. The lease was renewed on two occasions, and as a result, the expiry date of the lease was ultimately extended to October 31, 2011.

In September of 2010, the Landlord provided notice to the Tenant that the Landlord had incurred expenses of $76,125 to completely repave the entire parking lot. The Landlord's notice advised the Tenant that its proportionate share of such repaving was $14,533. Payment was requested on a lump sum basis. The Tenant refused to pay this amount, and vacated the premises at the end of the term on October 31, 2011.

The Tenant brought an application for an interpretation of the terms of the lease, citing the RioCan case in support of its argument that it was not responsible for the cost of the parking lot repaving. To briefly summarize, in the RioCan case, RioCan Holdings Inc. ("RioCan"), as landlord of a commercial plaza, resurfaced the plaza's parking lot and charged its tenants, including Metro Ontario Real Estate Limited ("Metro"), a proportionate share of the cost. The total cost of the parking lot resurfacing was $431,000, which RioCan amortized over a 20 year period before charging the cost to its tenants as part of their monthly common expense charges. The lease provided that the following expenditures were payable by Metro as additional rent:

  • "The Tenant shall pay... the Tenant's proportionate share of the cost of the following services provided by the Landlord... Repairs to and maintenance of the sidewalks, paved areas, storm, sanitary, water and utility services, directional signs and landscaping... provided that the term "costs" within the meaning hereof... shall not include... expenditures which by accepted accounting practice are of a capital nature..."6

After a lengthy review of the submissions of both parties regarding the nature of the parking lot resurfacing work and the interpretation of the terms "accepted accounting practice" and "capital nature", the Court in RioCan concluded that the resurfacing work performed on the parking lot was a capital expenditure, and therefore was not chargeable to Metro as additional rent pursuant to the terms of the lease.

The Tenant in Parsons argued that the decision in RioCan was determinative. However, the Court noted that the RioCan decision turned on the Court's interpretation of the language in Metro's lease. As noted above, the RioCan lease explicitly excluded "expenditures which by accepted accounting practice are of a capital nature" from additional rent. This language was critical to the Court's conclusion in RioCan that Metro was not responsible for the cost of repaving the parking lot, as the repaving work was found to be an expense of a capital nature. The lease in the Parsons case, however, did not contain any similar exclusion or carve-out from additional rent for "capital costs" or expenses "of a capital nature." Because the leases did not share this language, the Court found that the result in RioCan could not be directly applied to the facts in Parsons.

Instead, the Court considered whether the repaving of the parking lot could properly be characterized as "maintenance", or a "repair (reasonable wear and tear... excepted)" as these were the provisions in the Parsons lease that described costs that were the responsibility of the Tenant.

The Court heard evidence that the existing parking lot was approximately 19 or 20 years old at the time that the repaving occurred. The Court determined that the deterioration of the parking lot over a period of 19 or 20 years was due to the effects of wear and tear. Therefore, although the Tenant was responsible for certain costs of repair, the repaving of the parking lot fell under the wear and tear exception. The cost of the parking lot repaving could not be charged to the Tenant as "repair."

Next the Court looked at the definition of the word "maintenance" and found that this term is used to describe the concept of "keeping the property up." The Court concluded that the parking lot, rather than being "kept up", was completely replaced, which was outside the scope of the word "maintenance", and therefore, the cost of the parking lot repaving could not be charged to the Tenant as "maintenance."

The Court concluded, "the total cost of replacing the entire parking lot is beyond what was contemplated in the tenants' obligation to pay on a monthly pro-rata basis for 'repairs (reasonable wear and tear excepted)' or 'maintenance' of the common areas."7 The Tenant was not responsible for paying the $14,533 amount to the Landlord.

It is important to note that, aside from an examination of the specific wording in the lease, the Court also looked at the manner in which the Landlord purported to charge the Tenant for the repaving cost. The Landlord billed the Tenant for its proportionate share of the total amount of the repaving cost on a lump sum basis. This was not the usual method of charging for common area costs, which were normally estimated for the year and billed on a monthly basis. According to the Court's reasoning, this lump sum billing implied that the Landlord was aware that the repaving of the parking lot was not truly a common area cost.

Further, the Court also expressed the view that even if, on the terms of the Lease, the Tenant was actually responsible for a proportionate share of the repaving cost, it would be "unfair and unjust" to charge this amount to the Tenant on an unamortized basis, when the repaving of the parking lot would add 20 years to the life expectancy of the parking lot, and the Tenant had only 14 months left in its term.

Looking at Parsons and Riocan together, landlords may feel some anxiety. However, although these two cases were each decided in favour of the tenant, this does not mean that tenants can never be charged for the costs of any major parking lot work. Instead, these decisions serve as a reminder to both landlords and tenants that the language used in the lease is critical. If a landlord expects to be able to charge its tenants for this type of work, it should ensure that its leases actually allow it. Similarly, a tenant who feels that the landlord should bear all the costs of major parking lot work should ensure that costs of this nature are clearly excluded from the tenant's responsibility, or at the very least, such costs should be amortized. A well-drafted lease can help both parties avoid unpleasant surprises down the road when it comes to the costs of parking lot work.

Footnotes

1 2012 ONSC 1819 (CanLII)) [RioCan].

2 2012 ONSC 6098 (CanLII)) [Parsons].

3 Parsons, ibid. at paragraph 14.

4 Ibid. at paragraph 15.

5 Ibid. at paragraph 13.

6 RioCan supra note 1 at paragraph 2.

7 Parsons, supra note 2 at paragraph 23

About Dentons

Dentons is a global firm driven to provide you with the competitive edge in an increasingly complex and interconnected marketplace. We were formed by the March 2013 combination of international law firm Salans LLP, Canadian law firm Fraser Milner Casgrain LLP (FMC) and international law firm SNR Denton.

Dentons is built on the solid foundations of three highly regarded law firms. Each built its outstanding reputation and valued clientele by responding to the local, regional and national needs of a broad spectrum of clients of all sizes – individuals; entrepreneurs; small businesses and start-ups; local, regional and national governments and government agencies; and mid-sized and larger private and public corporations, including international and global entities.

Now clients benefit from more than 2,500 lawyers and professionals in 79 locations in 52 countries across Africa, Asia Pacific, Canada, Central Asia, Europe, the Middle East, Russia and the CIS, the UK and the US who are committed to challenging the status quo to offer creative, actionable business and legal solutions.

Learn more at www.dentons.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Specific Questions relating to this article should be addressed directly to the author.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
16 Oct 2018, Other, Calgary, Canada

Dentons and SheEO are coming together for a morning of #radicalgenerosity on October 16, 2018. Meet Vicki Saunders, Founder of SheEO, and learn about how SheEO is changing the landscape for female entrepreneurs.

17 Oct 2018, Webinar, Toronto, Canada

With the continued focus on Bill 148’s significant changes to the Employment Standards Act, Dentons’ Toronto Employment and Labour group is pleased to launch a new webinar series focusing on Bill 148.

17 Oct 2018, Webinar, Toronto, Canada

Dentons and SheEO are coming together for an evening of #radicalgenerosity on October 17, 2018. Meet Vicki Saunders, Founder of SheEO, and learn about how SheEO is changing the landscape for female entrepreneurs.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions