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A dispute arose respecting who should bear financial responsibility for the costs of a multi-million dollar building remediation project.
A 22-story long-term leasehold apartment complex in Victoria required remediation of the building envelope, which involved the replacement of windows, sliding doors, and bathroom fans which had deteriorated due to reasonable wear and tear. A dispute arose between the landlord and a leaseholder as to who was financially responsible for the project.
The 211 apartment units in the building are leased pursuant to a 99-year lease agreement which expires in 2073. Under the terms of the lease, the landlord has an obligation to repair and maintain the building and the leaseholders collectively pay for the expenses incurred by the landlord in doing so as “operating expenses” under the lease.
The landlord undertook the building envelope remediation project and charged the project costs to the leaseholders as operating expenses under the lease. A leaseholder subsequently commenced litigation against the landlord alleging that the leaseholders were not financially responsible for the project.
We represented the landlord through the entirety of the litigation process, which culminated in a two-week trial in 2019 where the landlord successfully argued that the lease both obligated it to undertake the project and allowed it to charge the entirety of the project costs to the leaseholders as operating expenses under the lease. We also successfully represented the landlord in the leaseholder’s appeal of the trial judgment in 2020, where it was affirmed by the Court of Appeal.
We represented the landlord through the entirety of the litigation process, which culminated in a two-week trial where the landlord successfully argued that the lease both obligated it to undertake the project and allowed it to charge the entirety of the project costs to the leaseholders as operating expenses under the lease.
Through its success at trial and on appeal, the landlord ensured that the building can be kept in good repair for the rest of the term of the lease and the lease will continue to operate in a commercially efficacious manner for the benefit of both the landlord and all of the leaseholders.
Importantly, the court found that the windows, sliding glass doors, and bathroom fans are all inextricably part of the “outer walls” as defined in the lease, based on expert evidence about the building structure. Case law on whether windows and other similar building components form part of the outer walls or exterior structure has been mixed; we expect this case may assist Canadian courts on that issue moving forward.
At the Court of Appeal, it was held that the lease was a standard form contract and therefore the standard of review when considering its interpretation is correctness, not reasonableness. We also expect this result to guide future arguments about standard form contracts and their interpretation in British Columbia.
The landlord’s position regarding its rights and obligations under the lease was confirmed by both the trial and appellate courts in judgments that provide helpful guidance for the future interpretation of leases throughout British Columbia.
More information about this case can be found in the following article: British Columbia Court of Appeal Affirms Principles Applicable to Lease Interpretation
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Our Commercial Real Estate Group has experience in all aspects of the law and practice related to commercial property acquisitions, management, structuring, development and sales.
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