The fourth and final bulletin in this series on Commercial Leasing & Landlord Remedies highlights another key takeaway from the Highway Properties case – a landlord’s duty to mitigate.
Historically, a landlord’s remedies were limited when a lease was terminated. Upon termination for a tenant’s default, the lease and its covenants ceased to exist and the landlord could recover only for breaches occurring to the date of surrender. However, Highway Properties confirmed that a lease is more than just a construct of property law; it is also a contract and accordingly, the common law rules governing contracts also apply when a lease is terminated.
Using this analysis, the court found that a landlord can sue for damages in respect of the unexpired term of the lease, provided that the landlord gives notice of its intention to do so. Importantly, where a landlord terminates and reserves the right to sue for damages for the unexpired term of the lease, the landlord also has a duty to mitigate its losses. This duty to mitigate may affect the calculation of damages owed.
The duty to mitigate does not import a standard of perfection, but it does require that commercially reasonable steps are taken to reduce the landlord’s losses.
While many Canadian cases continue to follow Highway Properties, some commentators suggest that the issue needs to be revisited.
For more information on any of the bulletins in this miniseries, or to discuss a particular matter, please do not hesitate to contact us.
This bulletin is the fourth part of a four-part series. Access the previous instalments below:
- (Part 1) Commercial Leasing & Landlord Remedies: Verbal Agreements/Offers to Lease
In the event of a breach of a commercial lease, an agreement to lease may be treated as a valid contract.
Read the full article >> - (Part 2) Commercial Leasing & Landlord Remedies: Landlord’s Options in the Event of a Breach
Learn about the four key remedies available to commercial landlords at law, in the face of a tenant’s breach.
Read the full article >> - (Part 3) Commercial Leasing & Landlord Remedies: Effects of Limitation Periods
A discussion on the consideration of when should a landlord respond to a tenant’s breach of a commercial lease.
Read the full article >>
This bulletin is authored by Sarah Turney (Partner - Real Estate Litigation and Land Development), Anna Lu (Associate - Real Estate Litigation and Land Development) and Brittany Vanword (Articling Student). For more information or to discuss a particular matter, please contact Sarah Turney or Anna Lu.
All information and opinions contained in this publication are for general information purposes only and do not constitute legal or any other type of professional advice. The content of this publication is not intended to be a substitute for specific advice prepared on the basis of an understanding of specific facts. Any reliance on this information is at your own risk.
