Canada: How To Avoid Some Of The Common Issues That Can Arise In Property Leases (Video)

Last Updated: November 27 2017
Article by Clive Chalkley and Felicity Lindsay

Property is a key part of the legal business and mistakes made in this sector can be costly. Although property law can be slightly illogical at times, the importance lies in ensuring that you have the processes in place to makes sure any counter-intuitive issues are picked up and resolved.


Michael Luckman: Hello I'm Michael Luckman and Chair of our Thinkhouse events and I'm talking today to Clive Chalkley and Felicity Lindsay on some of the common but substantial property issues that might come across a General Counsel's desk.

Clive, most businesses these days operate under leases. How do I get out of a lease?

Clive Chalkley: There are probably three common ways to get out of a lease. The first is a surrender. A surrender is basically where both parties agree to give up the lease before the end of its of term. The second is to exercise a break clause, so if your lease contains a break clause that's a clause that permits you to end your lease before the end of the term. Then the third one is to assign your lease, so give it to somebody else.

Michael: So Felicity, we have just heard Clive mention break clauses. What is a break clause?

Felicity Lindsay: So a break clause is a clause in a lease that allows one or both parties to bring that lease term to an end early. The break clause nearly always requires service of a notice, so something is needed to trigger that break clause taking effect. The break clauses almost always have conditions around them, so that tends to be payment of rent for the full quarter in which the break takes place and sometimes also conditions around yielding up with vacant possession which is a legalistic term, but which is one that you need to make sure that you catch and you comply with early.

Michael: And Clive if the landlord accepts the break, what then?

Clive: Yeah I mean even if a break notice is invalid, it is open for a landlord to waive that breach and if he does so then the lease will break in accordance with the terms of the notice.

Michael: Are email notices accepted?

Felicity: Generally in a property context email notices aren't accepted and that's because we as property lawyers know and love section 196 of the Law of Property Act 1925 and that says that notices can be served by registered post. A recent case E.ON v Gilesports confirmed that serving notices if the only notice provision in the lease is section 196, serving notices by email won't be valid. Of course sometimes you see a clause in a lease that expressly allows email service and if that's the case that's fine, but if it's only 196 then I'm afraid email service is out.

Michael: And I understand in sort of group structures that very often their lease is guaranteed by some other company in the group. Can a tenant assign a lease to its guarantor?

Clive: The short answer to that is no. It may sound crazy because most of the time it's the commercially sensible thing to do. But let me sort of just explain briefly why you can't do it.

Before 1996 it used to be the case that when a tenant took out a lease they were liable for all of the covenants for the entire length of the lease. So if they took a 25 year lease for that entire 25 year period, they were liable for the rent and other covenants on the lease, even if they had assigned it to another person. This created all sorts of problems, say somebody took a lease for 25 years, assigned it after five years and then 15 years later he then gets a massive bill for rent and other breaches of covenant that he had nothing do with, nor knew anything about. So parliament stepped in and said we've got to stop this, we have to stop this, we are going to introduce the Landlord and Tenant Covenants Act 1995. In brief, it said that once a tenant assigns its lease it is released from the covenants, i.e. so you assign it from one person to the next you are then released - section five. It then said the same is true for guarantors if you guarantee a lease, when that lease is assigned the guarantor is released and any attempt to try and get around this was caught by a section 25 that just said it's void, so it never happened.

In one of the cases that I was involved in K/S Victoria, the Court of Appeal had to consider this and they commented and said look we think these provisions mean that you cannot assign a lease from a tenant to a guarantor. Then in the recent case of EMI that was confirmed, you simply cannot do it. So whilst it may sound crazy it's one of those little intricacies or oddities of property law. You can't assign the lease from tenant to guarantor.

Michael: Talking of crazy and digging back in my memory of land law past. I remember a lot of discussions about dilapidations and I understand there are two types of dilapidations, normal ones and terminal ones, could you expand on that?

Felicity: Dilapidations during the term of the lease relates to breach of the repair covenant. Whereas terminal dilapidations are all covenants, breach of all covenants relating to the state and repair of the premises. So terminal dilapidations are much wider, they pick up things like breach of the decoration clause, breach of any clauses that require you to comply with statute in relation to the state and condition of the premises and also in relation to yielding up at the end. So putting back any alterations that you've made during the term, so terminal dilapidations is a much wider concept.

Michael: I'd imagine there's plenty of scope for bun fights at the end of leases to who pays what. Are there ways to protect yourself from a big dilapidations bill?

Clive: There are. It's probably just worth discussing two at the moment because there are a number of them. Probably the first one is to consider section 18 of the Landlord and Tenant Act 1927. Now this effectively means that the amount of damages that a landlord can recover for a breach of a repairing obligation is limited to the diminution in its reversion, so what do I mean by that. Let's say your lease was worth £1 million if it was fully repaired, a £1 million value, but in its state of disrepair it was worth £950,000, that would mean that the £50,000 difference is the cap on what the landlord can recover for breach of repairing obligations. So an important tool for tenants when they are looking at these things and have a massive bill to remember section 18.

The second answer one I would say, is a lot more practical. The second is just make sure when you're a tenant and you're leaving make sure you have a proper evidence of what the state of the premises is like. You won't get a chance once you've left the premises to go back in and video it, so make sure you have a full video diary account of what the premises look like at the date you leave.

Michael: So Felicity what are your key takeaways for a General Counsel sitting at his or her desk fretting about property issues?

Felicity: OK well I guess it's realise that property is a key part of the business and mistakes made on the property side can be costly. Property law, as I think you've heard from us today is often a bit illogical and slightly counterintuitive and so I guess it's just making sure that you've got those processes in place to make sure that those counterintuitive issues are picked up. So making sure that people who are serving and receiving notices know about these pitfalls and make sure that you have the systems in place to pick those things up early.

Michael: Felicity, Clive very interesting and thank you very much.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
7 Nov 2019, Seminar, Birmingham, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

14 Nov 2019, Seminar, London, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions