In Evergreen, a landlord of an office building in downtown Vancouver was experiencing financial difficulty and wished to redevelop the property in order to improve its economic viability.
The office building was occupied by IBI Leasholds Ltd., which was in its first of a five year lease, which lease contained an option to renew for a further five years.
The landlord gave notice to the tenant, notwithstanding the lack of any legal right of re-entry, that it was no longer going to comply with the terms of the lease and that it was going to terminate lease and was prepared to compensate the tenant for damages incurred, subject to its mitigation obligations.
The tenant refused to vacate the premises and prior to re-entry by the landlord, the landlord commenced an application in the Supreme Court of British Columbia seeking an order for re-entry and a declaration that damages were an appropriate remedy as opposed to specific performance.
The Supreme Court of British Colombia ruled in favour of the tenant on the basis that the landlord did not have the right of re-entry and possession and that a lease involves both contractual rights arising pursuant to the terms of the lease and rights incidental to the creation of the leasehold estate in land.
The landlord appealed the trial court’s decision and was successful to the extent that the Court of Appeal of British Columbia ruled that the trial court ought to have considered the equities as between the parties, including any factors relating to the “uniqueness” of the property demised and the relative hardship, if any, of holding the landlord to the strict terms of the lease.
While leave to the Supreme Court of Canada was granted, the appeal by the tenant was discontinued, leaving us with a decision that damages may be an appropriate remedy in lieu of specific performance when a landlord, without cause, seeks to terminate a lease prior to the expiry of before the end of the term.
Why is this case of any importance?
It is part of a moving trend in real property that agreements for land, in this particular case, a lease, is more of a contract than a conveyance of land and as such, in the event of breach, money and not specific performance (the actual giving of the property) will be the preferred remedy. I have difficulty with this position, for should the court’s reasoning become widely accepted, those principles can be used in other areas of real property law, such as purchases and sales of real property, and in such a case, a contract for land is just that, a contract and the underlying material bargain to the transaction; the land, will be nothing more than just a consideration.