Notice Requirements - Re: Commercial Tenancy

Martin v. Mailhot, 2020 ONCA 480 (CanLII)

[10] The purpose of the notice requirement in s. 19(2) is “to warn the tenant that its leasehold interest is at risk and to give the tenant an opportunity to preserve that interest by remedying the breaches complained of and, where necessary, by compensating the landlord”: 780046 Ontario Inc. v. Columbus Medical Arts Building Inc. (1994), 1994 CanLII 1188 (ON CA), 20 O.R. (3d) 457 (C.A.), at p. 464. Courts have insisted on strict compliance with this requirement: Columbus, at p. 464; Jay-Pee Drycleaners Inc. v. 2321324 Ontario Inc., 2017 ONCA 798, at para. 19.

[11] The issue in this appeal is the precise nature of the requirement for “compensation in money” as outlined in s. 19(2).

[12] This issue was addressed by this court in Chick ‘N Treats Inc. v. Woodside Square Ltd. (1990), 38 O.A.C. 138 (C.A.). In that case, the tenant breached the lease by failing to maintain accurate monthly statements of gross revenue and make them available to the landlord. On appeal, the tenant argued that the landlord’s notice of breach was invalid as it had not included a demand for monetary compensation. The court rejected this argument at paras. 6 to 8 of its reasons:

In our opinion, the additional requirement that the lessee make compensation for the breach cannot be mandatory, because the resulting obligation on the lessee to make reasonable compensation to the satisfaction of the lessor would be nonsense in situations, such as this in the case on appeal, where the breach is not quantifiable. We believe that it is a requirement of the notice if the landlord requires compensation in addition to remedying the breach, but it is one that can be waived.

…

It appears to us that in a situation where the breach is capable of remedy and the landlord has suffered damage which is compensable [in] money, then the landlord must assert both remedies in his notice if he intends to insist on satisfaction with respect to both, failing which, he will exercise his right of re-entry or forfeiture. [Emphasis added.]

[13] A demand for monetary compensation is never required for valid notice under s. 19(2). Rather, the requirement may be waived at the discretion of the landlord. A demand for monetary compensation is only necessary where, as a result of the breach, the landlord has suffered damages compensable in money and intends to insist on recovery, failing which, they will exercise their right of re-entry or forfeiture. In other words, where a landlord has suffered damages compensable in money and they fail to include a demand for monetary compensation in their notice of breach, they will be barred from relying on a tenant’s failure to compensate them for those damages as a justification for re-entry or forfeiture. In this way, a tenant will only be required to provide monetary compensation to preserve their leasehold interest where it is deemed necessary by the landlord in the notice of breach.