Who’s liable for damages under a commercial lease?

There are many reasons why a commercial tenant needs to carefully review the provisions of their lease. One reason is captured in the following question: When significant costs arise from unanticipated events, who get stuck with the bill? Most leases contain insurance provisions, requiring either the landlord or the tenant (or both), to secure insurance coverage- often specifying both the type of insurance and the amount.  A recent case highlights the importance of the wording of the lease in determining responsibility for costs.

In Nantucket Business Centre v. AB Autorama Limited, a tenant operated an automobile repair shop and accidentally started a fire which damaged the premises. The court attributed liability for the damage to the tenant because there was no provision in the lease requiring the landlord to maintain fire insurance on the property. Also, the lease specifically provided that the tenant needed to operate its business in a safe manner (ie. not start fires). Take a look at the article which talks about the case written by Kingston lawyer William Poulos on the bar-ex website.

You can contrast this case with an earlier decision mentioned in February on the ’Law of the Land’ blog where a sprinkler malfunction damaged a tenant’s premises. The lease required the tenant to carry insurance which covered negligence on the part of the landlord, and required that the tenant’s insurer waive its right to pursue a claim against the landlord for any negligence. The court found on the tenant on the hook for the cost of repairs. This case doesn’t seem particularly fair considering that the damage was not the fault of the tenant.  But it’s not really about fairness exactly- it’s about what the lease says.

Company directors can be liable for wages & benefits

What happens to employees when a company goes bankrupt? Usually, a receiver is appointed, assets are frozen, and employees might end up getting a small percentage of what they’re owed for wages because secured creditors are always first in line to be paid out of the company’s assets. But there’s a section in the Ontario Business Corporations Act which makes directors personally liable for unpaid wages even in the face of their company going bankrupt. A recent story in the Law Times highlights a case where this section was used by a court to make directors pay employee wages and benefits after their construction company went bankrupt. A corporate structure can’t protect you from everything.

News about me

This week, I’ve begun serving on the Board of Directors for the Women’s Business Network. It’s such a tremendous organization and I can’t say enough about all the great women I’ve met through the network in a relatively short period of time.  I know I will learn a lot and am really looking forward to it.  Anyone who doesn’t know about the WBN should check out their website for membership information and upcoming events.

Real estate investing seminar

If you’re interested in learning more about real estate investing, or how to avoid some of the legal traps in owing rental properties, plan on attending the seminar held by Marnie Bennett next Wednesday, September 17th, starting at 7 p.m. at Keller Williams, 610 Bronson Street in Ottawa. You can register online here.

Things to look out for in commercial leases

I came across an article on the Bar-Ex website written by lawyer William Poulos, talking about a common commercial leasing issue as it applies to a recent case. When does specific language in a lease override general language, or ‘boilerplate’? Commercial leases are often referred to as “carefree net leases”, meaning that tenants pay for all the costs associated with the property as additional rent. Most leases contain boilerplate language to this effect, and the lease at issue in this case was no different. What’s somewhat unusual is that another part of the lease made reference to the landlord being responsible for maintaining the structure of the building, including the roof. This exception became relevant because the roof had to be replaced and the landlord tried to pass this cost along to the tenant in the form of additional rent. He was unsuccessful because of the clause in the tenant’s lease which specifically made this type of maintenance cost the landlord’s responsibility. 

I’ll bet the tenant in this case is really thanking the person who suggested inserting this language about the roof into the lease in the first place.