The recent Manitoba Court of Appeal case of 441 Main Inc. v
Silver Pawn Pictures Inc., 2013 MBCA 70 is a reminder of how
important it is to be precise when exercising renewal or extension
Many commercial leases contain an option in favour of the tenant
to renew or extend the term of its lease. Usually such renewal or
extension is at a new market rent and otherwise on the same terms.
A process to settle the rent by negotiation and, failing that, by
arbitration is usually set out.
Since such an option benefits only one of the parties, the
tenant, the law regards it as a privilege. As a result of this
privileged status, the tenant must strictly comply with the terms
and conditions of the renewal or extension right in order to obtain
its benefit. This includes compliance with all the stipulations set
out in the lease as to the time, place and procedure for
exercising. As indicated in the 441 Main Inc. case, it is also
critical that the wording used to exercise such an option be
"clear, explicit, unambiguous and unequivocal."
The lease in this situation between 441 Main Inc. (the
"Landlord") and Silver Pawn Pictures Inc. (the
"Tenant") provided the Tenant with an option to renew the
lease for a period of either 3 or 5 years.
Prior to the time period for exercising the option, the Tenant
had continually asserted that it had a right to purchase the
building as well. The correspondence between the parties
demonstrated that the Landlord clearly did not accept that
The Tenant exercised its option to renew with a notice that
included the following:
"As required under the lease,
herein is our notice that we have elected to proceed with the
5-year lease option outlined in the lease.
It is anticipated that the building will, as you committed in
order to secure the lease from Silver Pawn Pictures, be sold to me
prior to this extension running its course."
The Landlord did not accept the notice and issued a notice to
the Tenant to vacate. The Tenant filed an application for a
declaration that the notice of renewal was valid notice. The matter
was heard and the application judge concluded the Tenant has
validly exercised its option to renew. The Landlord appealed.
The Landlord took the position that this was not a valid
exercise of the option to renew. The Landlord asserted that the
notice was ambiguous and/or conditional because it referred to a
purchase commitment that did not exist and was therefore not
On the other hand, the Tenant argued that the second sentence
set out above did not create any new condition or intention to
modify the lease and was clearly separate from the option to
The Court of Appeal reviewed the law and, in particular, noted
that an option to renew is a unilateral offer giving a tenant the
right to renew on the terms specifically set out in the option.
Trying to obtain anything more renders the notice a counter-offer,
as opposed to an acceptance of an existing offer, and does not bind
the landlord unless that counter-offer is accepted.
The court held that by inserting the second sentence noted above
the Tenant was attempting to impose a new term or condition into
the relationship that did not exist under the lease. Applying the
law referred to above, the effect of doing this was to make the
notice a counter-offer and not the exercise of an existing right.
The Tenant was asserting its allegation that there was an agreement
to sell in place and attempting to confirm a commitment to that
effect in this notice. In trying to do this, the Tenant cost itself
In other situations tenants have failed by loose wording such as
indicating an "intention to exercise" rather than an
actual exercise. Stating that the renewal will be subject to some
further agreement has also been held to result in an ineffective
Having a clear and unequivocal notice is accordingly required to
protect the rights. All other terms of the lease must be adhered to
as well, such as providing the notice in the manner contemplated by
the lease (which may be by registered mail, delivery, electronic
communication or as otherwise stated in the lease) to the proper
address shown in the lease. Careful consideration of all terms of
the option in the lease are required to protect the right.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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