Cracking The Option To Extend: Litigator And Solicitor Perspectives On Commercial Lease Compliance And Implications

In a recent British Columbia Supreme Court decision of UBCGG Leasing Ltd. v. Cressey Development Corporation, 2026 BCSC 444, Justice Crerar denied an urgent injunction brought by a tenant of 20 years — the operator of Gold’s Gym’s flagship British Columbia location — who failed to deliver timely written notice to exercise its option to extend, emphasizing that commercial landlords and tenants enter into commercial leases for certainty and that clear, express contractual language will prevail.

This decision serves as a reminder of the risks that commercial tenants and landlords face when lease obligations are not met with precision. We offer litigator and solicitor perspectives.

Facts

On February 27, 2026, the tenant, UBCGG Leasing Ltd. brought an urgent injunction application prohibiting its landlord, Cressey Development Corporation, from prohibiting it from accessing certain premises located at the University of British Columbia (“UBC”) upon the expiration of its lease the following day. The underlying court materials were filed the day prior to the injunction.

Since 2005, the tenant operated a Gold’s Gym at the premises. This was the first “Gold’s Gym” location in British Columbia, which the tenant described as its “flagship location” in the Province.

The original lease was entered into in November 2005, following which the parties entered into a series of subsequent agreements (collectively, the “Lease”).  Material terms of the Lease for the premises included:

• Non-Waiver: no waiver of the tenant’s obligations or landlord’s rights would occur, other than by way of an express waiver in writing, duly executed on behalf of the landlord;
• Time is of the essence;
• Overholding: would be on a month-to-month basis; and
• Entire Agreement: the Lease may not be amended except in writing and executed by the parties.

The Lease also contained an option to extend for three periods of five years each. The Lease required the tenant to provide written notice to the landlord that it was exercising its option to extend on or before the date which is six months prior to the expiration of the relevant term.

There were a series of lease renewals between the initial term and the date of the injunction. There was variability in the circumstances in which each of the prior options to extend were exercised. For example, the first option to extend was carried out in strict compliance with the terms of the Lease, whereas the subsequent two extensions were not carried out in strict compliance with the terms of the Lease.

However, it was undisputed that the tenant did not provide clear written notice exercising its option to extend before August 31, 2025 (six months notice prior to the expiration of the Lease on February 28, 2026). Although there was evidence of discussions between the parties contemplating that the tenant would remain on the premises, such as “Our Lease Agreement ends on February 28, 2026. I am not sure what the renewal rate will be at that time, but I hope you will take into consideration the obstacles we are now facing” and “Can you provide me with some insight on what the rental rate will be to renew the Lease? We hope the Landlord is willing to work with us to find an amicable solution so we can retain tenancy at this location”, the Court found that these communications did not constitute clear and unequivocal statements that the tenant would exercise its option to extend the Lease. Rather, the communications were found to show a desire to negotiate.

However, the tenant argued that as a result of its prior communications with the landlord and the circumstances surrounding the previous extensions of the Lease, the landlord waived, acquiesced, or was estopped from relying on strict compliance with the Lease with respect to the exercise of the option to extend.

The Court did not accept this argument, finding that the parties were sophisticated commercial entities governed by express terms and emphasizing the need for certainty in such relationships: “Commercial landlords and tenants enter into commercial leases for certainty”.

Although the Court found that historically, there may have been some departure from strict compliance with the Lease, the landlord never expressly said that it would not rely on the written terms of the Lease or that its conduct would displace the express language of the Lease.

Legal analysis

The Court applied the 3-pronged test for an injunction in denying the application.

On the first prong, the Court found that this was “a rare case where the applicant tenant has not set out a serious question to be tried”, relying on the clear and express language of the Lease, which “prevail[s]” over equitable arguments.

The second prong of the test relates to an assessment of irreparable harm. The tenant argued that it would suffer irreparable harm because it had established 20 years of reputation and goodwill at its UBC location. Although the Court acknowledged that there may be cases where harm to goodwill may be amorphous and not adequately compensated in monetary damages, it found that in the context of this dispute the loss of goodwill did not constitute irreparable harm as it was quantifiable (in terms of lost profits, for example). In doing so, the Court appreciated that the goodwill associated with Gold’s Gym is not tied to the individual location, as there are multiple Gold’s Gym locations in British Columbia and if the tenant had to relocate, that goodwill would follow it to its new location. This was in contrast to situations where a company may have “all of its goodwill eggs in one commercial location basket”.

The third prong of the test relates to the balance of convenience. The Court found the following:

• Adequacy of damages as a remedy – while damages would presumably adequately compensate the landlord, if the landlord suddenly cuts off communications with a new tenant or delays a new tenant’s tenancy, that may harm the landlord’s reputation;
• Likelihood that damages would be paid if awarded – the tenant failed to reassure the landlord or the Court that its undertaking for damages had substance;
• Status quo – this was found to be a neutral factor because the tenant would likely have to vacate but this was not the result of any sudden new action by the landlord;
• Public interest and third parties – although the current gym members would be inconvenienced, UBC has other gym facilities; and
• Other factors – the landlord is likely to enter into an agreement with a third party before the underlying petition is heard, but the Court found this was largely the result of the tenant’s own delay. The Court noted that if the landlord were to proceed to lease the premises to a third party in the face of litigation, this would be done at its own risk as it may face a potential claim for damages.

Although the landlord argued for special or elevated costs on the basis of the significant work that was necessary at the last hour, the Court found that the last-minute rush was not so far out of the ordinary for commercial disputes to warrant special costs. The Court also noted that leading up to the application, there were offers back and forth, the acceptance of which by either party would have rendered the injunction unnecessary.

In ordering scale C costs, the Court found the following:

[99]      While I have found in favour of the landlord, it was not pure folly or spite for the tenant to proceed with this petition and this present application. Although this urgent application is most disagreeable and inconvenient for the respondent and its counsel, and for the Courthouse staff, and for the judge, who is going hoarse and is exhausted at 4:39 this Friday afternoon, it is not such a clear abuse such as to warrant special costs. That all said, I will award costs of this application on the highest scale: scale C.

[100]   It is clear that counsel for the landlord had to expend considerable resources, time, and energy in a finite amount of time, to respond to this application: hence the higher costs.

Takeaways

For Litigators:

• Clear and unambiguous language is required for a notice to extend. It is not enough to simply indicate an intention to exercise an option to extend. The Court distinguished between communications expressing a desire to negotiate and a formal, unequivocal declaration of exercise.
• Goodwill may be quantifiable in some cases and unquantifiable in others. Of consideration is whether the party has “all of its goodwill eggs in one commercial location basket”. Where a tenant operates multiple locations under a recognized brand, courts may be less likely to treat loss of a single location’s goodwill as irreparable harm.
• The Court may be persuaded to depart from ordinary scale B costs if the successful party is forced to expend significant resources in a short period of time. Last-minute injunction applications carry elevated costs risk, compounded where the urgency is self-created.
• The tenant’s waiver and estoppel arguments were rejected. The Court emphasized that the parties were two sophisticated commercial entities, and that while there may have been a level of informality in respect of a certain renewal, at no point did the landlord provide an express and clear written waiver of the express terms of the Lease.
• This is a case where the applicant had not set out a serious question to be tried. Where lease provisions expressly address non-waiver, time of the essence and entire agreement, the threshold for displacing those terms will be a high one.

For Solicitors:

1. Extension versus Renewal: A Terminology Note

• The judgment uses “renewal” and “extension” interchangeably, but the distinction matters in Canadian commercial leasing law. The Lease expressly provided that exercise of the option “shall result in an extension of the original Lease…and shall not be deemed to result in a new demise.” An extension continues the existing lease; a renewal creates a new one, raising questions about which original covenants survive.
• Option clauses should expressly state whether exercise results in an extension or a new demise, and any subsequent modification agreement should confirm which original provisions carry forward.

2. Key Drafting Lessons 

• Time of the Essence and Strict Notice Requirements: The six-month written notice deadline was mandatory and non-negotiable. Solicitors should ensure time-of-the-essence provisions are included expressly in any extension or modification agreement — not merely incorporated by reference — and that notice deadlines specify the required form, recipient, and method of delivery.
• Non-Waiver Provisions: The non-waiver clause — requiring any waiver to be express and in writing — was central to the landlord’s success. Solicitors acting for landlords should draft non-waiver clauses broadly (covering condoning, overlooking and delay) and ensure they are carried forward into extension agreements. Solicitors acting for tenants should warn clients that informal accommodations from a landlord do not necessarily provide legal protection, particularly if they do not accord with the requirements of the written agreement.
• Payment Mechanics: The tenant’s post-dated cheque failed to constitute “advance payment” because the funds were unavailable before the deadline. Payment provisions should specify the exact form of acceptable payment (certified cheque, bank draft, electronic transfer) and the precise deadline, including time of day.
• Entire Agreement Clauses: When drafting modification agreements, solicitors should expressly confirm which original provisions are preserved and clearly identify every provision being modified, suspended, or deleted — a generic “all other terms remain” may be insufficient.

 3. Preventative Guidance 

• Diarize Option Deadlines: Deadlines should be flagged expressly in reporting letters and re-diarized whenever a new extension agreement is signed. A tenant should consider a reminder system flagging upcoming dates at 6 months, 3 months and 1 month prior to deadline. 
• Keep Renewal Communications Formal and Unambiguous: If a tenant intends to exercise an option, the communication should be a standalone written notice using the precise language of the option clause, not embedded in a wider commercial discussion.
• Address Past Informality in Writing: Where there has been a prior departure from strict compliance, solicitors should take immediate steps. Landlords should confirm in writing that any accommodation is a one-off and that all rights under the lease are reserved. Tenants should seek written confirmation of any accommodation at the time it is given and, before the next option deadline, confirm in writing with the landlord the precise mechanism and deadline for exercise. Both parties should include a provision in any subsequent modification agreement expressly confirming that strict compliance will be observed going forward.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2025