Law Times

Law Times • January 18, 2016 Page 13 www.lawtimesnews.com Clashing limitation periods Commercial leases present deadline challenges BY MARG. BRUINEMAN For Law Times R eal estate runs on its own time. But the ques- tion facing many in- volved in commercial leases is when does the time to collect on related expenses and overpayments run out? When Ontario's Limitations Act was introduced in 2002, it standardized the limitation pe- riod to two years for everything except for real estate. The old rules for real estate were separat- ed out of the old legislation and the Real Property Limitations Act (RPLA) was created, retain- ing the longer limitation periods for real property. That includes a six-year maximum to collect ar- rears of rent. "They standardized them all at two years [with the Limita- tions Act], but what they didn't do is touch anything related to real estate," observes Barry Weintraub who practises com- mercial litigation and environ- mental law as a partner with Reuters LLP. "They left the old provisions in place and created the RPLA. It's the same law that it was all along." What lawyers have since been dealing with is where does the Limitations Act end and the RPLA begin. While the latter deals with land ownership is- sues and the former with money, Weintraub describes rent as the classic overlap. That, he says, has resulted in a great deal of activity surrounding limitation periods when it comes to real estate. "It is a claim for money arising out of the use of land," he says, which is where the two pieces of legislation dissect. Julie Robbins, a partner with Dentons Canada LLP who works in commercial leasing, points out that what is being sought is clarity — landlords and tenants want to know when their claims expire. "Unfortunately, it's not clear in the legislation," she says. This overlap was addressed when Justice Graeme Mew of the Ontario Superior Court of Justice dealt with Pickering Square Inc. v. Trillium College Inc. In that case, the lease agree- ment included provisions for rent of a commercial space and required that the tenant have continued and diligent opera- tion of its business or be subject to an additional per diem charge. The tenant vacated the premises but continued to pay rent to the end of the term. After the lease expired, the landlord claimed damages due to the tenant's fail- ure to operate its business con- tinuously. In the lease, the landlord in- dicated that all money given to the landlord should be treated as rent. Therefore, argued the land- lord, he has six years to collect the additional money. The tenant argued that the ad- ditional charges were not part of the rent and the landlord's claim was, therefore, statute barred. The court decided that the per diem charge was for damages and was separate from rent, even though it was described as rent in the lease, so the Limitations Act with its two-year limitation period would apply. Justice Mew wrote in part: ". . . the word 'rent' in the RPLA is not an empty vessel that the par- ties may fill at their discretion. It must be interpreted in light of the context, scheme, and object of that statute and the law of lim- itations in Ontario. Moreover, limiting the RPLA definition of 'rent' as I have done above does not deny the landlord the right to seek any particular form of remedy for sums not ordinarily defined as 'rent.' It only affects the time period in which the claim must be brought." Robbins says the generally ac- cepted view, supported by Pick- ering Square, is that the opera- tive limitation period to bring a claim for repayment of an over- payment by a tenant falls under s. 4 of the new Limitations Act, which is just two years. But, ulti- mately, there are arguments for both sides and she is waiting for a definitive decision for direction. "I think the court is looking for ways to support the new Lim- itations Act where they can," she says. "The prudent thing to do, as a tenant, is assume you only have two years. "If something is not clearly rent, I suspect it will just fall un- der a contract." But that doesn't close the door on the opportunity to con- tract out of the Limitations Act, says Steven Pearlstein, a certified specialist in real estate law and a partner at Minden Gross LLP. He says the predominant view had been that landlords can go back six years for claims for unpaid rent and tenants were es- sentially limited to two for over- payment of rent. But Pickering Square seems to limit the sce- narios where a landlord can take advantage of the RPLA's six-year limitation period. Following Pickering Square, a lawyer acting for a landlord who wants to stipulate in the lease that all money paid by the tenant be treated as rent should also add that, if it's governed by the Limitation Act, the limita- tion period be extended to six from two years. "Everybody's just going to say I'm going to change my standard form" to specify that provision, says Pearlstein. LT Focus Barry Weintraub says how rent and other payments are treated under limitation periods is creating legal activity. YOUR ADVANTAGE, in and out of the courtroom. TF: 1.888.223.0448 T: 416.868.3100 www.thomsonrogers.com Since 1936 Thomson, Rogers has built a strong, trusting, and collegial relationship with hundreds of lawyers across the province. As a law firm specializing in civil litigation, we have a record of accomplishment second to none. With a group of 30 litigators and a support staff of over 100 people, we have the resources to achieve the best possible result for your client. Moreover, we are exceptionally fair when it comes to referral fees. We welcome the chance to speak or meet with you about any potential referral. We look forward to creating a solid relationship with you that will benefit the clients we serve. Every time you refer a client to our firm, you are putting your reputation on the line. It is all about trust well placed. TRUST Thomson, Rogers Lawyers LEONARD KUNKA | ALAN FARRER | CARR HATCH Untitled-7 1 2016-01-13 4:02 PM Check out lawtimesnews.com for insight from our regular online columnists Monica Goyal discusses the latest gadgets and trends in legal technology in Bits & Bytes

• Cover