Money Mart Canada Inc. v. Austrocan Investments Inc. originally entered into a Lease agreement in 1989. In 2003, a new Lease was signed for a five-year term and granted an option to renew for an additional five-year term. On December 2, 2008 (the "December Notice"), the Tenant sent a letter to the Landlord purporting to exercise the option to renew the Lease. The December Notice also proposed further changes to the Lease, such as a defi nition of permissible uses and for the right to terminate in certain circumstances. The parties were never able to come to an agreement on the "other changes" and on September 1, 2010, the Landlord delivered written notice to the Tenant terminating the tenancy. Following several extensions of the termination date, the Tenant vacated the premises in April 2011. At issue was whether the December Notice constituted a valid exercise of the option to renew. The Landlord claimed that it did not while the Tenant claimed it was valid.

The Court considered the surrounding circumstances in determining whether the Tenant demonstrated an unequivocal and unambiguous intention to negotiate a new lease or renew the existing Lease. Although a paragraph in the December Notice expressed a desire to exercise the option to renew, other paragraphs discussed the possibility of amending, deleting or adding various clauses, which was contrary to the wording of the right to renew that called for a renewal on the same terms and conditions as in the original Lease. Further, the letter ended with the statement "if you are in agreement with this proposal." Reading the letter as a whole and the surrounding circumstances, the Court ruled that the December Notice was not a clear and unambiguous exercise of the right to renew. Therefore, the Lease expired and the tenancy was converted to a month-to month lease.

In Rinaldo Hair Stylist Ltd. v. bcIMC Realty Corp., the Tenant, a hair salon, entered into a Lease with the Landlord in 1998 for a 10-year term expiring May 2008. The Lease contained a renewal option for two additional five-year terms on written notice to be delivered by May 31, 2007. The Landlord's leasing agent was engaged in ongoing renewal negotiations with the Tenant, but as of March 2007, the parties were far apart on renewal terms. By July 2007, the Tenant had been silent for two months and the agent then notified the Tenant by letter of the Landlord's decision to terminate negotiations and pursue other potential tenants. Following the letter, the Tenant and the Landlord's agent re-engaged in negotiations and the agent sent another letter to the Tenant in August 2007 asking whether the Tenant was interested in a renewal. The Tenant did not respond to the Landlord's inquiry and the Landlord notified the Tenant in October 2007 that they would be required to vacate the premises on or before May 31, 2008.

The Tenant brought an action claiming that the Landlord's conduct throughout negotiations led them to believe that the Landlord waived the strict written notice requirement for renewal under the Lease. The Landlord countered by bringing an application for summary judgment. The application was granted and the action was dismissed. The judge found that no conduct on behalf of the Landlord would have reasonably led the Tenant to infer that the strict compliance with written notice for renewal had been waived. The negotiations were conducted by the Landlord in good faith and even though negotiations were constant, the two parties were far from agreement. The negotiations that took place after the renewal notice was required were negotiations outside of the Tenant's renewal option and outside any restrictions the Lease may have imposed. The Court of Appeal dismissed the appeal and determined that the case was appropriate for summary judgment.

Tenants Beware: Do not taint your exercise notice with proposed changes to your lease. Keep them separate and distinct. If you decide not to exercise your option unless certain lease amendments are obtained, then negotiate the amendments separately before you exercise the option to extend/renew and well before your exercise period expires. The extension/renewal and lease amendments may be documented in the same agreement, but avoid making your exercise notice conditional on new proposed amendments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.