- with readers working within the Basic Industries industries
The Court of Appeal continues to signal that common sense – viewed through the lens of what is commercially reasonable – should prevail when interpreting business agreements. We have written about the subject here in the context of a share purchase agreement.
The Court of Appeal recently applied that same kind of practical approach in the interpretation of commercial lease.
In Convocation Flowers Incorporated v. Anisa Holdings Ltd., 2026 ONCA 145, the Court upheld an application judge’s decision that the landlord repudiated the lease by cutting off the tenant’s access to loading docks, even though the lease did not explicitly give the tenant the right to use those loading docks.
When it initially leased the space, the tenant had negotiated an agreement with the former landlord to enlarge certain loading docks at the commercial property. That agreement was included as a schedule to the lease. When a new landlord bought the property, it wanted to use those loading docks for its own business, and notified the tenant that its access was being cut off.
The landlord relied on a clause in the lease that it could establish rules and regulations governing use and occupancy of the premises, including common areas, in its sole discretion. The loading docks and the driveway leading to them were part of the common areas. Most significantly for the landlord’s position, there was nothing in the body of the lease that said the tenant was guaranteed a right to use that part of the property.
The Court of Appeal agreed with the application judge’s interpretation of the lease as a whole in a commercially reasonable manner. The fact that the prior landlord had agreed to expand the loading docks so the tenant could operate its flower distribution business meant that, even if some parts of the lease gave the landlord discretion to alter the common areas, it could not do so in a manner that would alter or eliminate the tenant’s use of those negotiated improvements to the loading docks.
By doing so, the landlord fundamentally breached the lease, amounting to a repudiation that the tenant could accept and treat the lease as being terminated. That meant the tenant was in the right to move out and sue for damages.
Add this decision to the body of contractual interpretation cases where the principle of “interpreting a contract as a whole in a commercially reasonable manner” is clearly another way of saying, apply common sense.
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