The landlord-tenant relationship, or leasehold tenancy, is conceived as an estate in land.
It is created by a contract but it is a property relationship (same as buyer and seller of land).
The tenant has a right of exclusive possession, even against the landlord, who only has the reversion (the right to retake possession and full rights when the tenant’s estate is at an end).
Lease = “a demise”, Leased land = “demised premises”.
A lease must have a definite, or potentially definite, duration.
Note: The common law has been superseded by statutory reform in the case of residential tenancies, though its rules still apply to commercial leases.
Point – the landlord-tenant relationship is a relationship created by contract, express or implied, in which a person with an interest in real property (the landlord or leasor) grants a lesser interest in that property – the “lesser interest” is that of exclusive possession of land for a definite or potentially definite period of time.
Class Notes:
Exclusive Possession v. Intention of the Parties
Leases and their relationship to other interests in land
Like b/w contract and property.
Residential Leases are governed by Statute…and not CML property.
The alternative to a lease is a license. A license is simply permission to use land for some purpose, which can be revoked at any time.
This is important because a lease offers substantially greater protections than a licence, which is revocable on demand.
If an agreement’s duration is uncertain, then it is a license – there are 2 lines of cases dealing with how to decide whether it is a lease or a licence:
1) some cases state that if the agreement grants or intends to grant exclusive possession for a fixed time it is a lease – therefore the only thing that matters is whether exclusive possession has been granted, even if the word licence is mentioned 100 times;
2) other cases suggest that it is the intention of the parties that matters – if they intend to be landlord and tenant then the court will give effect to that intention.
Commercial Leases:
Arises usually at the end of a lease:
They breach conditions
Includes surrender
Tenant abandons (repudiates lease)
Landlord accepts (express or implied)
Highlights difficulty of dual nature of commercial lease
Mitigation: in K law the idea that you have to try and minimize your losses.
British American Oil and DePass, 1959, ON CoA, p. 519 – Indicators of a Lease; EXCLUSIVE POSSESSION creates Lease
Facts: Two documents were signed between BA and the tenant Depass: 1) lease for gas station premises; 2) equipment loan and retail dealer sales agreement (RDSA) – BA is trying to evict Depass under the Ontario Landlord Tenant Act – Aspects of the lease: 1) Described as tenants in the documents; 2) BUT several facts indicate there was no exclusive possession: a) Not allowed to park or store cars on property; b) Not allowed to erect building or other structure; c) BA allowed to post ads but Depass not allowed without BA’s written consent; d) Breach of RDSA is a breach of the lease – Under the RDSA obliged to sell and use only BA products – Depass claiming that because of restrictions in lease he is just a licensee not a tenant – if Depass is a licensee then BA could not rely on LTA to evict.
Issue: Do the documents create a Lease between the parties? [Yes – LEASE]
Maj (J.A. Schroeder):
For there to be a lease, there must be: 1) a reversion in the landlord; 2) the creation of an estate in the tenant; AND 3) a transfer of possession and control of the premises to the tenant. The reservation of rent to the landlord is not essential.
To determine if estate is transferred the court must determine whether exclusive possession is transferred – If only transfers privilege to occupy it is merely a licence (only leases create an estate in the land) – To determine whether exclusive possession was transferred you look to the intention of the parties.
to find intention of parties:
1) documents (lease or licence)
2) control retained by landlord vs. right to exclude by tenant
3) expected activities on the premises
As they chose to use the vocabulary of a lease, it seems clear that this is what they wished to create. Furthermore, the acts to be performed required exclusive possession. Thus there was a lease, not a license.
If the effect of the instrument is to give to the holder an exclusive right of occupation of the land, though subject to certain reservations or to a restriction of the purposes for which it may be used, it is in law a demise of the land.
Nothing in the agreements suggest BA intended to retain possession or control of station inconsistent with grant of exclusive possession – Nature of business requires exclusive possession – Furthermore, the language used in the agreements uses the term lease and tenant so this seems to be the intention of the parties – Therefore BA granted estate to tenant
Rule – degree of right to exclude depends on nature of the property and use thereof.
Metro-matic v. Hulmann, 1973, ON CoA, p.523 – INTENTION TO CREATE LEASE; Looks like commercial lease, but held as lease
Facts: Building owner entered into “lease agreement” with Metro-Matic for use of the laundry room – MM agreed to install, maintain, and operate washing machines for a fee and pay rent – agreement specified that owner “demised” the laundry room to MM (“demise” is the technical legal word for lease) – MM employees had free access to demised premises at all reasonable times for specified purposes – owner agreed to provide all tenants in building with free access to laundry room – MM covenanted that it would use the premises to carry on the business of an automatic laundry only – MM agreed not to establish competing laundry room – building was sold to new owner – new owner attempted to get a new company to supply the laundry room and disconnected the MM machines – MM sued for breach of the lease.
Issues – Has Matro-Matic created a valid Lease? [YES]
Maj (Brooke J.A.):
Trial judge said that it was a license and not a lease because there was no exclusive possession by MM
CoA: Cites BA Oil as leasing case law
Appears that Parties intended to create a lease:
Careful to employ words customarily used in leases AND words traditionally required to create an estate or interest in land. The words “demise” and “lease” indicate the parties probably intended a lease –
J.A. Borroke seems to equate exclusive control over the machines and the laundry room to exclusive possession and finds that it was a lease.
Basically, the judge said that the covenants restricting the use of the room is functionally equivalent to the restriction placed on a residential apartment to only use it as a personal dwelling – therefore, there is a lease which the respondent breached.
The choice to use the word “lease” or “demise” is significant. The fact that there are limitations as to the use of the demise does not make its possession less exclusive.
Ratio:To determine whether it is a lease look at:
1) whether there is exclusive possession by the lessee;
2) the intentions of the parties.
Rule – Right to exclude depends on the nature of the use intended to be made of the premises.
Comments: In both MM and BA, restrictions on the tenant did not vitiate exclusive possession.
