Relief from Forfeiture and Racism in Leasing

Relief from Forfeiture and Racism in Leasing

August 16, 2021

By Brian Babcock

Racially tainted reasons to deny a commercial tenant a renewal of their lease can result in relief from forfeiture and an order extending the term of the lease for the renewal period, even without evidence of conscious racial motivation.

The Ontario Court of Appeal has upheld a lower court ruling in favour of the tenant, holding that the application judge was entitled to take judicial notice of anti-black racism in Canada (that is, no evidence of that fact was necessary). The judge was also entitled to consider “the societal realities pertaining to Black businesspeople” as a factor in exercising the court’s discretion to award an equitable remedy.

The tenant had attempted to initiate the lease renewal process, but had not given the formal notice of exercise of the renewal option in time. The judge found as a fact that the tenant’s attempts to contact the landlord were “studiously avoided” because the landlord did not want the tenant to remain.

On the application for relief from forfeiture, the judge found that the landlord’s evidence was “almost a caricature of racially derogatory themes.”

The landlord’s position was logically inconsistent – it said it wanted “more family oriented customers”, where the tenant’s business was family run. The landlord’s complaint about alcohol sales was inconsistent with the term of the lease permitting a licensed restaurant. The landlord provided no evidence to support its “economic” justification for wanting a new tenant, but made derogatory comments about the tenant’s customers which suggested racial motivation.

On the equities required to grant relief from forfeiture, it was significant that the tenant was not in breach of the lease, had a successful business, had never missed a rent payment, and continued to pay rent throughout the pandemic. The tenant had made substantial investments in leasehold improvements, the value of which would be diminished if it did not get the renewal. The tenant acted in good faith.

Most significantly, the landlord could not demonstrate any financial loss or other prejudice if the tenant remained.

On balance, equity favoured the tenant.

Relief from forfeiture is an equitable remedy, and was appropriate in this case.

This decision reflects the ongoing role that the principles of equity play in providing justice in the face of actions that might conform to the strict “letter of the law” but are unfair.

It also demonstrates that systemic racism is still an issue in society, and we must all guard against allowing stereotypes or unconscious prejudices to affect our actions. It is encouraging to see the courts taking a leading role in progress in this area.