From AdvocateDaily.com......
Ruling on diner’s lease provides food for thought
An Ontario Superior Court of Justice injunction issued on behalf of a family restaurant to block multi-million dollar renovations at Toronto’s Manulife Centre has given landlords, tenants and their legal counsel something to chew over, says Toronto real estate lawyer
Peter Neilson.
In the matter of
Bloor Street Diner v. The Manufacturers Life Insurance Company, the Bloor Street Diner, a long-time Manulife Centre tenant, argued the extensive renovations planned to make way for Italian food emporium Eataly were prohibited by the terms of its lease.
Justice Elizabeth M. Stewart agreed, noting the renovations won’t only be disruptive during eight months of construction but will have a net effect of isolating the restaurant and obscuring its view.
“When I first read
reports about this dispute, I thought it was over exclusivity because another food emporium, Eataly, would be coming into the complex,” says Neilson, a partner with
Shibley Righton LLP. “After reading the decision, it’s much deeper and more complex.”
The core issues revolve around the unique terms of the lease that guarantee certain access and visibility rights to the Bloor Street Diner, which was established in Yorkville in 1981 and moved to the Manulife Centre in 1994.
“Clearly some of these details were important to the restaurant and to Manulife, who wanted them as a tenant,” Neilson tells
AdvocateDaily.com.
The diner claims that renovation plans to encase the centre with a glass façade along Bloor, Bay and Balmuto Streets and add 50,000 square feet of new interior retail space would seriously impact its operations (a dining room, a café/patio, and an express counter).
As Neilson notes, the original lease defined what would be permissible as "minor changes". Key among them was preserving the visibility of the restaurant. It offered protection from interruption and required prior written approval from the Bloor Street Diner for any other changes.
“In effect, the Bloor Street Diner is entitled to the quiet enjoyment of their premises,” says Neilson, who did not act in the matter and makes his comments generally.
A 2007 amendment to the lease allowed installation of upgraded mechanical systems.
As part of the deal to allow that renovation, Manulife gave the Bloor Street Diner $200,000 in a lease allowance and later paid $50,000 compensation for the minor disruption of jack hammering.
“What’s unusual is that generally tenants don’t get these kinds of clauses in commercial leases,” Neilson says. “I have had clients complain that renovations disrupted their businesses but it was never enough to go to court.”
With the Manulife matter, the lease protections are unique but certainly underline that tenants may have a much stronger case for unreasonable disruption if the impact on their business is substantial.
“I think many landlords and tenants and their counsel will be reading through this decision to see what they might learn,” Neilson says.
The court held Manulife's renovations would constitute a breach of the lease: “Its present plan represents substantial interference that is of a grave and permanent nature,” the decision states.
In allowing the injunction — which puts all renovations on hold including the arrival of Eataly — the judge suggested the parties go back to the table and find a solution.
“Manulife is free to find a solution that does not breach its contractual obligation to the Bloor Street Diner,” Justice Stewart states. “It is always open to the parties to collaborate as they have done in the past and to negotiate a plan that will achieve their mutual objectives.”
