Canada: Can You Put Lipstick On A Pig And Call It Rent?

Until recently, there has been some confusion over the limitation period in respect of rent. This is largely due to the fact that there are two references to the term "rent" in the Real Property Limitations Act (with one section referring to a ten-year limitation period¹ and the other section referring to a six year limitation period²), which governs claims for rent. This differs from the Limitations Act which governs damages claims (and has a limitation period of two years).

In Pickering Square Inc. v. Trillium College Inc.³, the Court was called upon to determine the effect of a provision in a lease which deemed all payments under that lease as "rent" (and, by implication, therefore subject to either a six or ten year limitation period in accordance with the Real Property Limitations Act). In particular, the Landlord's claim was for liquidated damages, as was permitted under the lease, for each day on which the tenant did not carry on business at the leased premises.

The Court defined "rent" to be the payment due under a lease as compensation for the use of land or premises and concluded that rent reserved under a lease is governed by Section 17 of the Real Property Limitations Act and, therefore, subject to a six-year limitation period.

The Court held that it would be inconsistent with the limitations structure in Ontario to allow parties to shelter a claim for a lease payment under the six-year limitation period simply by designating it as rent. Accordingly, the Court held the liquidated damages for failing to carry on business were not rent and therefore the general two-year limitation period applied. The tenant was therefore only responsible for the daily damages arising during the immediately preceding two year period.

The moral of this story is that landlords simply cannot put lipstick on a pig and call it rent – landlords should act quickly in asserting claims against tenants for damages to avoid the lapsing of the two-year limitation period and are reminded that rent will not be broadly construed by the courts so as to permit the more generous six-year limitation period to apply.

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Footnotes

1 Section 4 of the Real Property Limitations Act (Ontario).

2 Section 17 of the Real Property Limitations Act (Ontario).

3 2014 ONSC 2629.

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