The ongoing uncertainty in the economy and the resultant market slowdown have tenants re-evaluating their space needs. After considering their options and weighing demand, some tenants determine that the appropriate way to shed space on a cost-effective basis is to sub-let all or a portion of it to a third-party sub-tenant. Often a condition of a sub-lease is the sub-tenant's waiver of its rights in case of termination of the head lease.
In economic downturns, talk in the commercial leasing industry inevitably turns to what to do with unreliable tenants and how best to protect the position of the landlord. However, it is not only landlords and sub-landlords that are facing problems; tenants and sub-tenants are increasingly finding themselves left out in the cold, figuratively and literally, when their landlord or sub-landlord faces financial difficulties.
As a result of the current economic downturn, many commercial tenants are finding themselves in precarious financial positions and are approaching landlords to seek rent relief in order to survive until the economy recovers. While landlords are often hesitant to diminish their revenue stream by granting rent relief, they may have a strong self-interest in facilitating a successful lease restructure if the tenant's need is genuine.
Given the weak economy, many tenants may find themselves with premises that they no longer require or which they need to dispose of in order to cut costs. This update explores some of the more common exit strategies employed by tenants, each of which is fraught with business and legal issues.
Commercial leases often contain gross-up provisions relating to the calculation of the tenant's share of operating costs and realty taxes. In addition, commercial leases often include gross-up provisions relating to the calculation of the tenant's rentable area. What are gross-up provisions? Why are they necessary and are they fair? What are the issues associated with gross-ups that landlords and tenants must consider?
Key amendments to the regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act have now come into force. These amendments include real estate developers in the group of people required to keep records and report certain transactions. Most importantly, real estate developers will have to develop comprehensive compliance regimes specifically to manage this reporting.
Governments must often invoke their powers of expropriation to carry out public projects. From an owner’s perspective, if approached for a government land acquisition, there is always the reality that in the absence of a voluntary transfer, the owner faces expropriation of the required land in return for compensation.
There are necessarily a number of business and legal implications which a lender must consider in determining whether to take possession of a mortgaged property. Foremost among these is the risk of incurring liability for costs in connection with the remediation or clean-up of any environmental contamination affecting the property and any related third-party claims.
In Ontario, a lender’s decision to take possession of a mortgaged property upon the borrower’s default can have important implications. For example, once in possession of the mortgaged property, the lender incurs the obligations of a mortgagee in possession and is liable to account for the revenues that were or should have been received from the mortgaged property.
When a borrower defaults on its obligations under a mortgage in Ontario, the lender has a variety of remedies from which to choose. A lender’s enforcement strategy and choice of remedy after a default has occurred will regularly depend on careful consideration and the weighing up of its options at as early a stage as possible. This update looks at the potential pitfalls that a lender may face along the path to recovery.
Occasionally, a tenant will present a landlord with an agreement entitled 'landlord waiver' or 'landlord’s waiver and consent', requesting often urgent execution. A landlord waiver is usually delivered to a landlord for execution in the context of a loan transaction by a tenant. As part of the financing, the tenant may be required to grant security over both its real and personal property in favour of its lender.
It seems these days that everyone is going green. The real estate sector is no different, with industry players rapidly familiarizing themselves with terms such as ‘green leases’ and ‘greening a building’. This shift towards green building practices has been driven greatly by the benefits that are a direct result of implementing a green approach. But how exactly is a building designated as green?
The past several decades have seen a major push towards using environmentally friendly products, increasing conservation of resources and ensuring viable sustainability for future generations. Although progress has been slow, the green movement is becoming more prevalent in the commercial and industrial building and leasing sector of the economy.
Sub-leases are far from being a new concept in leasing, but recent cases have highlighted the subtle differences between a sub-lease and a standard commercial lease. Sub-landlords and sub-tenants should keep these thoughts in mind as they navigate the potential traps of sub-lease negotiations.
When changes were made to the limitations laws in Ontario in 2002, the legal community debated extensively about when and how the new limitations would apply to commencing an action in respect of existing and future disputes. Parts II and III of the former Limitations Act were repealed and replaced with the Limitations Act 2002.
Although there are several reasons why a tenant and mortgagee would want to terminate the lease if the mortgagee went into possession, tenants and mortgagees usually prefer to play it safe and obtain the protections afforded by a non-disturbance agreement. This update looks at some of the more significant issues to consider when negotiating non-disturbance agreements.
New legal requirements regarding asbestos recently came into force, which significantly increase the responsibilities of landlords and tenants in dealing with asbestos in their buildings and premises. Lease negotiations will be affected by parties responding to the regulation.
Although not a new concept, there has been an increase in sale-leaseback transactions, both for owners of operating businesses that wish to monetize the real estate they use and for governmental agencies transferring the risk of management and ownership of government buildings to third parties. This update looks at the key differences between a sale-leaseback transaction and a normal leasing transaction.
A purchaser of income-earning commercial real property must take steps to confirm the integrity and enforceability of the rental income stream. This update provides a brief explanation of nine key aspects of leases that should be reviewed by the purchaser or its legal advisers during the due diligence period.
The granting of building naming rights is an inducement used by landlords to secure a desirable, major or lead tenant in a commercial development. For tenants, the ability to have their corporate moniker on a building is an important brand promotion tool. However, the issues associated with naming rights must be properly addressed as part of the lease negotiations.