April 22nd - 2014

Legal Beat: Dispute over amount of parking leads to lawsuit

This case deals with the amount of parking provided to a commercial tenant in a shopping mall. The tenant, Farm Boy Inc., operates grocery stores in the Ottawa area and leased space in a mall.

Mervin Burgard Q.C.

This case deals with the amount of parking provided to a commercial tenant in a shopping mall. The tenant, Farm Boy Inc., operates grocery stores in the Ottawa area and leased space in a mall. The term of the lease covered 10 years with an option to the tenant to renew for two five-year periods.

This expensive dispute centres on the provision of parking. In the offer to lease, clause 16.0 states that “The landlord shall provide a minimum of five and one-half

(5.5) parking spaces per 1,000 square feet of leasable area for the tenant’s use, with not more than fifteen (15) parking spaces to be at the rear of the building.”  A lease was eventually signed between the owner of the lands (2030 Tenth Line Developments Inc.) and the tenant. The parking clause was now 19.19 and it stated: “The landlord shall provide a minimum of 5 and one half (5.5) parking spaces per 1,000 square feet of area of premises for the tenant’s non-exclusive use, with not more than 15 parking spaces to be at the rear of the premises.”

The tenant took the position that both clauses have the same meaning and required the provision of 5.5 spaces per 1,000 square feet of leasable area in the entire shopping mall. There was no dispute that this parking ratio was not provided. According to tenant, it was 13.9 spaces short of the number of spaces contracted for.  Farm Boy viewed parking as essential to its grocery business and claimed that the alleged breach caused a substantial loss of profits. It claimed damages of $876,754 for the initial term of the lease and $1,136,858 to the end of both renewal periods.

The judge heard extensive evidence and found that there was a breach of the lease but that the tenant failed to show that the breach probably caused a loss. He then ordered the tenant to pay the landlord partial indemnity costs of $382,537.45 on a full indemnity basis of $574,334. The court of appeal agreed with the decision but reduced the costs to $200,000 and allowed appeal costs to the landlord of $30,000.

Farm Boy v Mobius 2012 ONCA 692, 2011 ONSC 2877, 2011 ONSC 4832


MERV’S  COMMENTS

Mervin Burgard Q.C.

There were numerous legal issues in this case, including the meaning of the clauses.  Is the “per square feet” referring to this store space, or to the entire mall? Commercial REALTORS® may want to read the entire 28-page trial judgment. These are obviously large players in the Ottawa commercial area who can afford to litigate, unlike most clients and REALTORS®. Take the time to make sure that all of your documents make legal, commercial and common sense.

Mervin Burgard, Q.C.

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