May 26, 2026

By Nick Melchiorre 

THE ISSUE

Many commercial leases contain a provision granting the tenant a right to renew the lease for a further term. The terms of these provisions vary greatly, but they always require that the tenant gives notice and set out a deadline for the notice.

What happens when the tenant misses the deadline to renew the lease?

RELIEF FROM FORFEITURE

We have written before about relief from forfeiture. This is the relief that courts can grant, in Ontario and elsewhere, in situations where after a technical breach of a contract, the harm that would be suffered by the party committing the breach is out of proportion to the seriousness of the breach. Usually, the party trying to rely on the breach has suffered little or no harm and is trying to take unfair advantage of the situation. It is a form of equitable relief, so fairness and reasonableness are at the heart of the decision whether or not relief will be granted.

Commercial leases are a common source of applications for relief from forfeiture. In addition to the Superior Court’s general power to grant relief from forfeiture under section  of the Courts of Justice Act, Ontario’s Commercial Tenancies Act expressly provides for it in section 20, which provides that:

… the court may grant such relief as, having regard to the proceeding and conduct of the parties under section 19 and to all the other circumstances, the court thinks fit, and on such terms as to payment of rent, costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future as the court considers just

THE ISSUE RESTATED

The right to relief from forfeiture is so broadly stated in the statutes that you probably are wondering when courts will actually grant or deny relief, and what test they really apply.

THE CASE

The court will not lightly interfere in a commercial transaction freely entered into by the parties. Owners of commercial premises are entitled to expect compliance with leases in order that they can plan for rentals and manage their properties.

The most important factor is the conduct of the tenant. Equity is all about fairness and protecting innocents. Poor conduct will block you from obtaining relief from forfeiture.

On the other hand, where it looks like the landlord is trying to take unfair advantage of the error, relief will be granted.

The facts of 8750297 Canada Inc. v. Ambassador Realty Inc, are complex, as happens in many cases. As we have said before, the facts are usually the most important factor in the outcome of the case. What makes this case significant though is that the judge conducts a thorough review of prior cases, neatly summarizes the test for relief from forfeiture in situations like these, and explains why in this case, relief is appropriate.

Key facts favouring the tenant in this case included that they and their predecessors had occupied the premises for a very longtime; they had built up a thriving business; and had recently spent significant money improving the premises.

The judge starts the analysis with a look at the basic framework:

• • An option to renew a commercial lease is treated as a contractual right. Courts usually require strict compliance with the terms (e.g., giving notice within the required time limit).
  • Missing the deadline usually means that the option is lost.
  • Equitable relief from forfeiture can sometimes save a tenant who has missed the deadline.
  • The courts can consider whether the breach was inadvertent, the tenant acted promptly once aware, and whether the landlord is not unfairly prejudiced, for example, if the landlord has already leased the premises to someone else in reliance on the tenant’s failure.

The last bullet is the most important for understanding the test, so let’s break it down into its components:

• Whether the breach was inadvertent,
• Whether the tenant acted promptly once aware, and
• Whether the landlord is not unfairly prejudiced, for example, if the landlord has already leased the premises to someone else in reliance on the tenant’s failure.

As the judge says, these components are considerations, they are not a mandatory formula.

So why was relief granted in this case?

• • The tenant showed due diligence;
  • The tenant was not a sophisticated businessman;
  • The tenant acted in good faith and verbalized an intention to renew to the property manager;
  • His failure to comply was due to illness and inadvertence, rather than deliberate disregard;
  • He assumed he would receive a reminder from the respondent as had been the past practice; and
  • As soon as he was told about the missed deadline, he immediately advised the respondent he wished to renew the lease.

Weighing against this was the fact that the landlord had already found a new tenant and entered into a lease with them.

So, what about prejudice to the landlord or the new tenant?

The judge says this:

I find that the third party is aware that the parties are in court dealing with the issue of the lease.  I find that the prospect of financial ruin on the applicant weighs in favour of relief as opposed to the speculative prejudice on Aladdin which is wishing to expand.  There is no evidence that Aladdin will not be able to operate its ongoing business.

They compared this case to the prior cases where relief was not granted. Those cases featured factual differences, such as:

• the tenant did not provide any explanation for why they did not exercise the option in time; or
• the tenant’s solicitor had failed to deliver the notice, and the owner/landlord had already entered into an agreement of purchase and sale to sell the property; or
• the issue was whether the offer was open for acceptance; or
• the tenant was “hedging his bets”; or
• the tenant was a sophisticated businessperson [which means they should have known better]; or
• the tenant had a history of missing rent payments or other

The common feature in all of these situations is that the tenant was not “innocent”.

In contrast, the judge in this case described the tenant’s expectations and actions as “reasonable”. Reasonableness is a key factor in the exercise of equity.

The landlord’s behaviour was not as innocent, or as reasonable, in the judge’s view. The judge refers a leading Supreme Court of Canada case which defines the duty of parties to perform contractual duties in good faith. The judge criticizes the landlord for not showing the spirit of good faith.

Relief from forfeiture was granted. The lease was found to have been renewed, and the tenant was restored to his rights under the lease.

TAKEAWAYS

• Relief from forfeiture is a powerful tool;
• In breach of lease cases, relief is not easily obtained;
• As with other equitable remedies, each case turns on its own facts;
• Reasonableness, and innocent conduct are vital factors;
• If the landlord is trying to take advantage of the breach in bad faith, relief is more likely to be granted;
• If you are the tenant, it is always better to just exercise your rights under the lease in compliance with the terms of the lease; and
• If you are a landlord, taking advantage of a technical breach in bad faith will not be looked upon favourably by the courts.

WHAT WEILERS LLP CAN DO TO HELP YOU

Whether you are a commercial landlord or a tenant, our team of experienced commercial and real estate lawyers know how to give you the commonsense advice that you need whether you are negotiating a new lease, dealing with renewal, or need advice about any of your rights under the lease.

If you are unlucky enough to have a dispute regarding your existing lease, 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 or residential real estate deal, or in a dispute about an existing lease, please call us and see if Weilers LLP are the right lawyers for you.