Relief From Forfeiture: An Equitable Second Chance for Commercial Tenants
Breaching a lease may result in a tenant forfeiting its right to use and occupy the leased premises. Even where that happens, courts have a discretion to grant relief from forfeiture under section 24 of the Law and Equity Act if such relief would be fair and just in the circumstances. The recent BC Supreme Court decision in The Owners, Strata Plan VIS2030 v. Ocean Park Towers Ltd., 2015 BCSC 146 highlights the relevant factors and considerations when a tenant applies for relief.
Ocean Park concerned a 99-year lease between a developer, as tenant, and a strata corporation, as landlord, for the use and occupancy of 60 parking stalls in the strata’s parking lot. The developer prepaid $10 as the total rent for the entire term of the lease and agreed to pay a proportion of the maintenance costs on an annual basis.
Twenty years into the arrangement, the strata became concerned about the use of certain parking stalls that the developer had subleased. When the parties could not resolve the issue, the strata terminated the lease and sought possession of the stalls. The Court readily found that the lease had been breached, but granted the developer relief from forfeiture, thereby reinstating the lease and allowing the developer to retain the use of the stalls.
The Court considered three factors in deciding that relief from forfeiture was appropriate: (1) the conduct of the developer, and whether it had “clean hands”, (2) the gravity of the breaches, and (3) the disparity between the value of the property forfeited and the damage caused by the breach. The Court concluded that neither the developer’s conduct, nor the nature of the breaches, disentitled it to an equitable remedy. For the final factor, the developer argued that it would be disproportionate to deprive it of a long-term asset in circumstances where it was difficult to ascertain the loss, if any, that was suffered by the strata. The Court agreed.
When a court grants relief from forfeiture, it has the power to impose terms as to costs, expenses, damages, compensation, and all other matters, and courts frequently award costs against a tenant who is granted relief from forfeiture despite its success. This proved to be the case in Ocean Park, where in addition to regular tariff costs, the Court awarded the strata 75% of its actual legal costs not covered by the tariff. Moreover, the Court ordered the developer to pay 75% of the strata’s expenses associated with hiring a property manager in an attempt to resolve the dispute.
Landlords and tenants should be aware that even if the relevant factors are satisfied, relief from forfeiture may not be available. For example, as we have discussed in a previous post, relief from forfeiture is not available for residential tenancies terminated under the Residential Tenancy Act. Section 28 of the Law and Equity Act also prevents a court from granting relief from forfeiture if it has previously done so for the same breach, or if the same breach had previously been waived for the benefit of the tenant.
By-law developer Development Permit By-Laws landlord and tenant leases municipal zoning by-law occupancy section 24