Commercial Real Estate Law
Articles, News & Events
We
are pleased to provide our most recent news releases and articles for
your information. Our clients count on us to stay ahead of new
developments in the law and their impact on business. We constantly
research, advise and write about all aspects of the law relating to
commercial leasing.
Our commercial real estate law firm contributes regularly to the International Council of Shopping Centre Annual Canadian Law Conferences, Canadian Bar Association (Ontario) programmes, The Shopping Centre Newsletter, Law Society of Upper Canada courses, and continuing education services such as Insight Legal Education Service Programmes.
Subscribe
to our RSS Feed
Latest Articles
Arbitration Clauses: What should they say and how do I use it?
Arbitration is a legal procedure for resolving disputes in which one to three private, neutral “arbitrators” who are appointed by or on behalf of the parties act as decision-makers. Unless another format is agreed upon, the arbitrator decides the issues in dispute by applying rules of law and equity and their decisions are final and binding.
The first step is to identify the issue between the Landlord and Tenant. The commercial lease should be examined for any existing arbitration clauses, which may outline important information, such as the jurisdiction which governs the arbitration. The Claimant must serve a Notice of Arbitration to the other party. Once the Landlord and Tenant appoint an arbitrator, a preliminary hearing is held discussing the related issues to the arbitration, including but not limited to the procedure to be used, location, witnesses, and procedure for appeal. The claimant must serve the respondent and arbitrator with its Arbitration Submissions and the respondent is to serve the claimant and arbitrator with its Reply Submissions. All documentary evidence, witness statements and expert reports must be exchanged.
After the arbitration takes place, the arbitrator renders her “Award”.
There is generally an appeal period. Once this period expires, the
successful party may enforce the award and if the respondent fails to
pay, the claimant may bring an Application to the Ontario Superior Court
of Justice to have the Award transferred to the Courts for enforcement
purposes. For more information about the arbitration process and various
examples of arbitration clauses, ranging from simple to complex. >>Read
Article.
Show me the Money! (a.k.a. Security for Leases)
Have you ever wondered about the different types of security available
for leases? Guarantees and indemnities are often confused for each other,
but there are several important differences. A guarantee is a secondary
obligation, since it does not survive the disclaimer of the tenant’s
lease in a bankruptcy. An indemnity, on the other hand, is a primary
obligation which, if properly drafted, will survive the bankruptcy of a
tenant and the disclaimer of the lease. The indemnifier is jointly liable
with the tenant to perform the tenant’s obligations under the lease.
Tenants can also provide deposits as security for leases. A rent deposit
is one option. This is collected by the landlord and applied towards rent
at specified times during the term, such as first and last months rent. A
security deposit is collected as security for the tenant’s performance of
its obligations under the lease and may be applied against non-rental
defaults, such as repairs or unpaid utility bills at the end of the term.
There are important considerations for landlords and tenants when
drafting agreements for rent and security deposits. Landlords should be
concerned about issues such as the replenishment of a security deposit
and how much time they have after the expiry of the lease term to fulfill
any restoration obligations before returning the security deposit to the
tenant. While tenants will also be concerned about the return of the
security deposit, they must also consider other issues, such as whether
interest accrues on the deposit.
Landlord may also opt to use a general security agreement (GSA) or PPSA
registration as security for their leases. A GSA grants a security
interest in certain defined collateral, usually the assets of the tenant,
to secure the tenant’s covenants under the lease. As a secured creditor,
the landlord can claim against the property in priority of other
creditors. Landlords and tenants should be aware of the importance of
careful drafting before entering into any type of security agreement. For
drafting tips, as well as information about another type of security for
leases, the letter of credit. >>
Read Article.
Operating Costs – A Review and Something New: Capital Expenditures – Amortization and Depreciation & Upcoming IFRS Changes to GAAP
Are capital expenditures properly recoverable as Operating Costs? How relevant are the International Financial Reporting Standards (IFRS) soon to be implemented in 2011 to this topic? Although the definition of “Operating Costs” in most leases includes capital costs, tenants generally take exception to this. Case law has left us with little guidance about the meaning of the phrase “capital costs” and/or “costs/expenditures of a capital nature”. Many leases give reference to “capital costs in accordance with GAAP” in their definitions of “Operating Costs”; however, the CICA refers to the concept of “betterment”, excluding the term “capital costs”. Based on the CICA Handbook’s definition of “capital assets”, we can conclude that expenditures incurred to create, acquire or improve a capital asset would amount to a capital cost. An expenditure incurred to repair a capital asset, however, would not fall under this definition. Further, a cost incurred to generate revenue or operate the business would not constitute a capital cost.
Defining capital costs is not the only challenge for landlords and tenants. There is often debate about how capital costs included in Operating Costs under a net commercial lease will be passed on. Specifically, the debate relates to whether capital costs will be fully charged in the year in which the cost was incurred, whether the expenditure will be amortized and what method of amortization will be used. There is confusion over the differences between amortization and depreciation. The CICA Handbook no longer uses the term “depreciation” and some leases only allow the recovery through Operating Costs of “amortization, but not depreciation”. The intention behind this may be to allow certain costs, incurred to replace and/or improve an asset, to be spread out and recovered over a period longer than a year, but to disallow recovery of the original cost of the initial acquisition on a “sinking fund” basis. Further issues relating to amortization arise where a tenant under a new lease pays amortization relating to an expenditure incurred prior to the lease commencement date or on the other hand, if landlords are entitled to recover an interest cost on the unamortized portion of the capital cost.
It is important for landlords and tenants who have leases that refer to
GAAP to have an understanding of the upcoming IFRS Standards; however,
due to the complexity of GAAP and IFRS, it is suggested that costs
recoverable under commercial leases should not be tied to GAAP, but
spelled out in clear lease terms. For more information about the
significant differences between IFRS and the existing CICA Handbook that
may impact landlords. >>Read
Article
Back to the Basics: An Overview of the Commercial Lease
Before drafting an effective commercial lease, it is essential to have a good understanding of the nature of leases and how they differentiate from licenses, as well as the differences between the various categories of commercial leases. A lease of real property is a contract between one party, the landlord, and another, the tenant, under which the landlord grants to the tenant the right of exclusive use of the identified property for a determinate period of time in consideration for which the tenant agrees to pay rent to the landlord. A license, on the other hand, is a simple contract under which the owner of property, the licensor, grants to another party, the licensee, permission to occupy or use the property; however, the licensee has no interest in the property. >>Read Article
Green Commercial Real Estate: Staying on Top of the Latest Trends and
Requirements
With growing concern over global warming caused by greenhouse gas emissions (GHGs), the government and commercial leasing industry have been forced to step up to the plate to address these issues. The Canadian government has made several important steps, including signing the Kyoto Accord and provinces have followed with their own initiatives, including the Western Climate Initiative and Regional Greenhouse Gas Initiative. There are also various systems being introduced to reduce GHGs such as the cap and trade system, where carbon credits are bought and sold within a regulatory framework that controls the methods by which GHGs are measured and reported and controls the procedures for trading these credits. The article also discusses renewable energy certificates (RECs) and the value potential for RECs and carbon credits. >>Read Article
News
Commercial Property Market – A
Tale of Two Regions
The economic downturn has impacted commercial real estate landlords
and tenants throughout
News ReLeases
Gold in the Sunshine on Your Roof –Solar Facility Rooftop
Leases
Concern over greenhouse gas emissions (GHGs) has produced a new
phenomenon – leases of rooftop space for the installation and operation
of solar power facilities.
Last May Ontario passed the Green Energy Act. One of its main objectives was to establish a feed-in tariff program (a"FIT" Program) whereby the Ontario Power Authority (the"OPA") committed to purchase, at very favourable rates, all of the green energy produced in the Province. In response to this incentive, owners of buildings are likely to be approached by solar power companies wishing to lease rooftop space to install and operate green energy systems.
Once an application is approved by the OPA, the applicant must sign a power purchase contract with the OPA for a term of 20 years. An important component of that contract is the transfer to the OPA of all of the environmental attributes associated with the project. As a consequence, any carbon credits and renewable energy credits belong to the OPA and not to the solar power company or the landlord of the property on which the solar power facility is installed. Read the complete article here.
Ontario Update: Preparing for the Harmonized Sales Tax
In March 2009, the Ontario government announced that it would be
harmonizing its PST with the federal GST in order to create a single
consumption tax of 13% effective July 1, 2010 (“Harmonized Sales Tax” or
“HST”). Other provinces have previously implemented a similar regime or
are about to follow suit. The change brings with it the need for both
landlords and tenants to understand and plan. From a leasing perspective,
that includes ensuring that their leases adequately address the new
system.
Read the complete
article here.
July 28th 2009 - Realty Taxes: What To Do When The Assessor
Drops The Ball
The process of apportioning realty taxes changed
on January 1, 1998, when business taxes ceased to be imposed. Since that
time there has been no need for individual assessments for specific
rental units. This poses a challenge to landlords and tenants in net
leases because the apportionment of real property taxes to individual
units is more difficult.
Read the complete
article here.
Past News ReLeases
>>For Past News Releases please click here.
Published Articles
>>For our Published Articles please go here.
Events
For Commercial Real Estate Events please click here Events page.