A recent Ontario Superior Court case will be of interest to
commercial landlords and tenants alike.
In 1251614 Ontario Ltd v. Gurudutt, the
tenant signed a 10 year lease that granted the tenant the right to
renew the lease for 2 further terms of 5 years each, with rental
rates to be negotiated at the time of renewal and settled by
arbitration, if necessary. In addition, the lease stated:
"Any such renewal to be on the same terms and conditions as
are contained in this Lease except...the form of the
renewal Lease shall be, at the landlord's option, a
lease extension agreement or a new lease in the
landlord's then standard form." (emphasis
The tenant gave notice of its intention to renew, prompting the
landlord to provide its then standard form lease. That particular
standard form had been signed by 8 of the 10 tenants occupying the
landlord's property. In all material respects, the standard
form was identical to the tenant's existing lease, except for
the inclusion of a demolition clause. The tenant refused to sign
the standard form, arguing that it had the right to renew on the
same terms and conditions contained in its existing lease. The
Court disagreed, holding that the landlord was entitled to require
the tenant to sign its current standard form lease if the tenant
wanted to renew (regardless of whether the standard form included
material changes from the existing lease).
In arriving at its conclusion, the Court was influenced by
several factors, including:
Sophistication of the Parties – both
landlord and tenant were sophisticated business entities that had
retained legal counsel to review the existing lease with the form
of renewal clause; and
Established Use of "Standard Form"
lease – the landlord's then standard form lease
had been consistently presented to tenants of the property (and
accepted by them) in the years leading up to the tenant's
Gurudutt presents some important considerations for
both landlords and tenants. Landlords should generally attempt to
insist upon renewal clauses like that found in Gurudutt in
order to accommodate future redevelopment opportunities and ensure
that their lease agreements can evolve with the times. It is also
important that landlords attempt to consistently use the same form
of lease with all tenants of a commercial property, so that the
Landlord can demonstrate a history of "uptake" in the
event of a dispute on this issue.
Tenants should be careful to ensure that any renewal clause
requiring the adoption of a future standard form lease provides, at
a minimum, that the tenant be allowed the opportunity to make
reasonable revisions and comments to such standard form. If a
tenant is already subject to a Gurudutt-type renewal
clause, then it would be prudent to request the landlord's
standard form lease prior to exercising the renewal option, to
determine in advance what material changes will be binding upon the
tenant during the renewal.
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.
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.
Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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).