May 2, 2023
If you are a landlord and promise customer parking as part of convincing a prospective tenant to sign a lease, make sure that it is provided, even if not mentioned in the lease. Especially if it is not mentioned in the lease.
That is the tough lesson learned by the landlord in Spot Coffee Park Place Inc. v. Concord Adex Investments Limited. The tenant operates a chain of high-end coffee shops and had a relationship with the landlord, which was a residential condominium developer that included commercial space in the buildings. Spot Coffee agreed to lease space in the new building relying on the landlord’s negligent misrepresentation of free, accessible and convenient customer parking. The free parking was not accessible nor convenient nor was it convenient for the condominium residents to access the coffee shop; rather the residents were likely to go straight to their units from the resident parking using elevators that bypassed the lobby where the coffee shop was located.
Due to the problems with parking and access, the tenant lost money and abandoned the lease. They sued for over $1,000,000 in damages.
The landlord relied upon an entire agreement clause to avoid liability for the pre-contractual misrepresentations. The lease was silent as to parking. You might think this would help the landlord, but the boilerplate entire agreement clause, as they often do, only applied to “the subject matter of the lease”.
The trial judge found in favor of the tenant, deciding that the representations as to parking were not related to the subject matter of the lease, because parking was not addressed in the lease. A reference to use of Common Areas was not enough to bring parking into the lease. Therefore, she said the entire agreement clause did not apply.
The Ontario Court of Appeal agreed that since parking was not mentioned in the lease, the clause did not apply. The pre-contractual misrepresentations created the tenant’s losses, and they recovered their damages.
This result might be surprising, because clearly parking was contemplated as part of the lease. This decision is yet another instance of courts favouring the party with the “moral high ground”.
- If you thought the entire agreement clause protects from ALL pre-contractual promises, you now know this is not necessarily so.
- Judges generally want to find in favour of innocent victims of misrepresentations and will stretch their interpretation of the agreement if necessary to achieve that result.
- The Court of Appeal shares this approach.
- Entire agreement clauses do not always achieve the purpose for which a landlord (or seller) puts them into the agreement.
- Careful drafting is required to preclude ALL prior representations from coming back to bite the negligent party.
- Some errors can be very expensive.
- A less generic entire agreement clause might have saved the landlord.
- A good entire agreement clause must be clear in what it covers.
- Courts will not “stretch” the language to protect the negligent party.
- Avoiding the problem through good drafting aside, if you find yourself in this landlord’s position, you need to attempt to present your case so as to claim the moral high ground.
WHAT WEILERS LLP CAN DO TO HELP YOU
Our team of experienced commercial and real estate drafters take the time to understand your deal and watch for hidden pitfalls such as features that may not be clearly included within the terms of the agreement. We then modify the language of the agreement rather than simply plugging in boilerplate wordings. We take the time to make sure that you review the agreement and discuss it with you to spot any additional concerns.
If you are unlucky enough to have a lawsuit over your agreement, and in particular over misrepresentations, our litigation team is skilled at locating, assembling, and presenting the evidence in the best possible way to attempt to assist you to claim the moral high ground favoured by the courts.
Whether you are entering into a new commercial venture or in a dispute at the end of the venture, please call us and see if Weilers LLP are the right lawyers for you.