February 25, 2015
In this situation, the landlord and tenant of a fast food outlet argued about the existence of an ATM (automated teller machine) on the property to dispense cash. The landlord objected to the installation of the ATM while the commercial tenant favoured its use on the site. They went to court and the tenant won.
The application (lower court) judge found that the use of the ATM was for appropriate business reasons, to assist the tenant in ‘keeping his costs low and his clients happy’. The judge took the time to examine and consider the language used in the lease.
He found that the ATM fell within the definition of permitted use because it was a tool that helped to achieve the business objectives of running the fast-food restaurant. He noted that “the installation of the ATM does not in any way change the purpose of the premises, which is a fast food restaurant.” Furthermore, the judge found that the use of an ATM was not a “purpose” for which the tenant was using the premises. Specifically, the application judge rejected the suggestion that the tenant was offering banking services.
The landlord appealed the decision. The appeal court judge ruled that, “The lease did not define fast-food restaurant; was silent on other equipment and business tools such as a cash register and a debit terminal that are critical to a fast-food restaurant and implicitly included in the permitted use of the premises; and nothing in the lease prohibited the installation and operation of an ATM.” The landlord lost a second time.
2249778 Ontario Inc. v. Smith (Fratburger), 2014 ONCA 788 (CanLII)
A seemingly minor issue amounted to a lot of legal costs. The commercial landlord was ordered to pay the tenant’s appeal costs of $15,000 plus the [lower court legal] costs -- in addition to his own legal bills. As the appeal court noted, “It is open to parties to a commercial lease to specifically include the installation and operation of an ATM as a prohibited activity in the lease.”
If you are a commercial REALTOR®, you may want to consider this issue when drafting an Agreement to Lease.
Mervin Burgard, Q.C.
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