Understanding Stock Clauses #5

By Gerry Neely
B.A. LL.B.

In reviewing lengthy legal documents, we may often concentrate on the meat of the agreement (the payments, the rents, the interest rate, etc.) and cast only a fleeting glance at the clauses which are variously described as the stock clauses, the fillers or just "all that bumpf". In doing so, we may miss the significance of the plain meaning of words or phrases which, if not understood or ignored, may cause some painful moments at a later date.

An example of this is the renewal clause found in a lease. Generally, the right of a tenant to renew is subject to his having paid all rents and other monies due to the landlord, and having observed all terms, conditions, covenants and provisions contained in the lease. This obligation on his part may be prefaced by the following words or phrases:

"Having duly paid all rents. . .", or

"Having duly and regularly paid all rents. . .", or

"Having punctually paid all rents. . . "

If you are the tenant and you wish to exercise your right to renew the lease, which of the above wording is most advantageous to you? This question came before the B.C. Court of Appeal in a case where, through an error made by the tenant's bank, the rentals due for a period of three months on the first of each month were not paid on the due date. In the lease which was being examined, the tenant's obligation was to duly and regularly pay the rent. It was agreed that if the tenant's obligation was only to "duly pay the rent", that meant only that there could be no default which had not been remedied at the time the tenant exercised his option to renew, or at the time the new term began. The question then was whether "duly" and "regularly" meant "punctually". If it did, then one day's delay in the payment of any one month's rent over the term of the five year lease would have resulted in the loss of the option to renew. The Court held that duly and regularly did not mean punctual, but what it meant was that the payments had to be made in a uniform and orderly manner which systematically observed the stipulated times for payment or performance, as opposed to casually or intermittently making the payments. In this context, regularly meant substantial but not punctual or exact compliance with the provision of time. The Court held that had it been intended that "one trivial and inadvertent default of one day in the payment of rent would defeat the option to renew", then the word that should have been used was the word "punctually".

From this it is evident that as a landlord, you would prefer that the tenant's right of renewal was based upon his having punctually performed his obligations, while as a tenant, you would prefer to only be required to duly perform your obligations, but prepared to accept an obligation to duly and regularly perform such obligations.

1.

McLaughlin v. Bodnarchuk,1957, 8 D.L.R. (2d) 596.

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