Originally published in Blakes Bulletin on Real
Estate Leasing, April, 2008
When changes were made to the limitations laws in Ontario in
2002, the legal community debated extensively about when and
how the new limitations would apply to commencing an action in
respect of existing and future disputes. Parts II and III of
the former Limitations Act were repealed and replaced
with the Limitations Act, 2002.
Part I was renamed the Real Property Limitations
Act (RPLA) and continued in its existing form. The new
Limitations Act was designed to simplify the
application of limitation periods by providing, subject to some
exceptions, a basic limitation period of two years based on a
principle of discoverability and an ultimate limitation period
of 15 years.
Lawyers dealing with leasing real property were unsure of
how potential litigious issues arising from leases and
limitations would play out in the courts. A lease has a dual
legal nature: it is a contract but at the same time it deals
with rights to real property. So do disputes regarding leases
fall under the contractual limitation periods in the new
The answer is surprisingly straightforward. The limitation
periods set out in the new Limitations Act do not
apply to proceedings to which the RPLA applies. Thus, the
limitation on several types of actions related to real property
are governed strictly by the RPLA, which sets out limitation
periods ranging from six to 60 years. The actions governed by
the RPLA relating to commercial leases are primarily actions to
recover arrears of rent or interest. Therefore if a dispute
relates to arrears of rent, a party has six years from the sum
becoming due, or six years following written acknowledgment by
the party owing the sum, to bring an action.
Generally speaking, actions arising out of commercial leases
that are not covered by the RPLA will be governed by the
limitation periods in the new Limitations Act.
Accordingly, any breach of covenant or breach of a clause in a
commercial lease that does not pertain to payments that can be
classified as arrears of rent will be subject to the basic
two-year limitation period under the new Limitations
Act. Some likely examples are situations of improper
tenant assignments or sublettings, a landlord improperly
withholding consent to assign or sublet, failure to obtain
insurance though contractually obliged to do so, and failure to
operate despite a continuous operating covenant.
Note that the provisions of the RPLA do not address issues
of overpayment of rent. Presumably then, a tenant making a
claim for recovery of overpayment of rent is subject to the
two-year rule under the Limitations Act. Tenants would
be prudent to bring any action, where necessary, to recover
overpayment of rent within two years from the time where a
reasonable person in the circumstances first ought to have
known of the claim in accordance with the discoverability
Whether parties can contract in a commercial lease to change
limitation periods also depends on which act applies. Under the
initial draft of the new Limitations Act, parties
could not contract out of the limitations. The subsequent
uproar by the business community led to the enactment of
several exceptions to this general principle; now, in business
agreements such as commercial leases, the parties can vary,
suspend or extend the limitations (the ultimate limitation
period may only be varied if the claim has been discovered).
However, under the RPLA, there is no explicit prohibition or
allowance on varying its statutory limitations, and any right
to bring an action is extinguished upon the expiry of the
period set out in the RPLA. Thus, it would seem the parties
cannot suspend or extend these limitations, but could likely
vary them by contract to reduce the applicable limitations
Landlords and tenants should remain diligent in the
surveillance of the operation of a commercial lease so that
enforcement of rights or disputes over breaches can be handled
efficiently and to ensure the opportunity to utilize the courts
is not lost. When it comes to recovering arrears of a rent
payment, a party has six years from the date the payment became
due to involve the courts for resolution. Where the issue is
overpayment, a party may be restricted to bringing an action
within two years. Parties are also limited to two years to seek
the assistance of the courts with respect to breach of other
terms under a lease. Where the applicable limitation is the
two-year period provided in the new Limitations Act,
parties may vary, suspend or extend the period in the lease
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.
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