Residential Tenancy - Renovations and Long Term Leases; Commercial Lease - Letter Agreement #190

By Gerry Neely
B.A. LL.B

The Residential Tenancy Branch of the Ministry of Labour and Consumer Services distributes a useful brochure outlining the rights and responsibilities of landlords and tenants in British Columbia. It lists, for example, the circumstance under which a landlord may gain possession of the property by giving two months' notice of termination. The most obvious use of this is on a sale of rented property where a purchaser wants the vendor as landlord to give notice of termination to the tenant.

The brochure also states the other circumstance in which a landlord may give two months' notice of termination, including the landlord's requirement for vacant possession to renovate the property.

The joinder of these two circumstances under the heading TWO MONTHS' NOTICE OF INTENTION has led some licensees to conclude that when the purchaser intends to renovate, rather than to physically occupy the premises, the vendor has the right to give this notice of termination on behalf of the purchaser prior to completion. The position of the Residential Tenancy Branch is that notice to terminate for renovation purposes can only be given by the purchaser once the purchaser has become the "owner".

However, the definition of landlord in the Residential Tenancy Act includes, "a person,…entitled to possession of the residential premises." Those words provide an argument that the definition of landlord includes a purchaser who is entitled to possession under an accepted unconditional offer to purchase once the purchase closes.

My informant at the Residential Tenancy Branch was not aware of a decision interpreting this part of the definition of landlord. it would be prudent, therefore, for a licensee to advise a purchaser that the vendor does not have the authority to give a termination notice prior to closing based upon the purchaser's intention to renovate, and that if the purchaser decides to give such notice, it may be ineffective.

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There will be old timers- in the business who remember the days before there was a Condominium Act, when the owners of apartment buildings realized ready cash from the sale of long term leasehold interests in the apartments. An amendment to the Residential Tenancy Act may have left some tenants/owners of long term leases wondering whether they are locked in to the lease for the balance of the term.

The effect of the amendment is to prohibit a landlord (which includes a tenant who has the right to sublet or assign occupancy) from entering into a tenancy agreement for a term of more than twenty years, or assigning a tenancy agreement for a term of more than twenty years unless the following circumstances apply. The first circumstance is that the tenant must be an individual who occupies the rental unit in question. The second circumstance is where the municipality in which the property is located gives approval by bylaw for the creation of the tenancy agreement or for its assignment. Apart from these circumstances it would appear that neither a corporation nor a non-resident "owner" of a long term lease may assign the lease of the unit.

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A case of interest to licensees engaged in leasing commercial property involved the enforceability of a letter of agreement containing a clause that the agreement between the parties was subject to the execution of a mutually satisfactory lease agreement. No formal lease was signed in spite of several attempts between the parties to agree upon terms and the landlord then took the position that no lease existed.

The judge decided that the letter of agreement created a valid lease because it identified the essential requirements of a lease, namely, the parties, the property, the date of commencement of the term and the rent. The existence of a valid lease was not affected by the clause requiring the parties to execute a mutually satisfactory lease. This was not a true condition precedent which prevented the formation of the contract, but instead was a term of a contract already in existence.

If the landlord intended to end the contract on the ground that a reasonable time for reaching an agreement had expired, it must first give reasonable notice to the tenant stating that if no agreement is reached by a fixed date, the lease will be cancelled.¹

1.

British Columbai Egg Marketing Board vs. Jansne Industries Ltd,., S.C.B.C. Vancouver Registry, May 26, 1992.

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