Actions speak louder than words. Even if those words are in writing.

Whether or not it’s in the commercial or residential world, negotiating is always a messy process that leaves copious amounts of room for mistakes. Like forgetting to waive a condition or forgetting to add or delete a term in an agreement. The real issue is not just the fact that mistakes happen, but whether or not someone can take advantage of this oversight to get out of bad deal.


Can you use a mistake to get out of a bad deal?


It’s rare, but the law can actually be applied fairly and sneaky litigation tactics won’t always work. A recent Ontario decision confirmed that the actions of the parties negotiating a deal may overrule what’s written in a contract. Here’s what, where and why:


A tenant and landlord entered into an Offer to Lease. There is a condition in favour of the tenant to waive for inspection and a condition in favour of the landlord to waive for financial approval. The deadlines for these conditions have come and gone without anyone fulfilling or waiving these conditions. Yet, the tenant and landlord continue to negotiate the lease terms. In other words, while the legal document – the Offer to Lease – states that the contract is over, no one acts like the contract is over.


During negotiations, the tenant and landlord agree verbally and in vague email correspondence that they’ll not strictly apply their legal rights and agree to carry on the negotiation process. No formal amendments are signed, the tenant starts incurring expenses to renovate the unit and the landlord offers no indication that the tenant doesn’t meet the financial standards outlined as the above-referenced condition of the Offer to Lease. That’s until the landlord has a change of heart and, without warning, claims that the Offer to Lease is void because neither party waived their conditions within the prescribed deadlines.


The evidence in this case is clear: the landlord is attempting to manipulate the law unfairly and use the contract as a litigation tactic. As such, the tenant sues, claiming that the landlord’s actions speak louder than the conditions of the contract and the landlord cannot benefit from such sneaky behavior. Thankfully, the courts agreed.


The Lesson Learned


Forgetting to waive a condition doesn’t necessarily mean that a deal is dead or that an agreement is void. Rather, if the parties verbally agree and act like the deal is going forward then the deal is still alive. A cautionary note: while this case means that your client won’t be penalized for your oversights that can happen during a negotiation, this doesn’t excuse sloppy work and it certainly doesn’t mean that you won’t end up with a RECO claim.




If it SAYS it’s binding, is it binding?

A version of this (true) story has happened to every real estate veteran. You’ve spent years chasing a client, a landlord, and another year negotiating the offer to lease.  The lease is now in the hands of the lawyers and your hard work is finally about to pay off … if the deal doesn’t die.

Since lawyers do have a reputation for being “deal killers”, you make sure that the parties have agreed to all material terms in the offer. For greater certainty, you further added a clause stating that:

  1. the offer is binding;
  2. the landlord and tenant have 20 days to use their best efforts to execute the lease.; and
  3. the final standard form lease is subject only to “minor non-financial amendments as may reasonably be requested by the Tenant which are acceptable to both parties…”.

You hand over the standard form lease to the lawyers assuming that the deal is bullet proof. But then…

The tenant (okay, the tenant’s lawyer) is unhappy with the standard form lease and makes 106 edits to the lease. You’re not overly concerned because most of the edits are minor and don’t affect the material terms of the binding offer you negotiated. Over a few months of back and forth, you’re relieved to find out at the landlord finally accepts 74 – that’s two thirds – of the edits. You’re sure the deal will close. After all, you have a binding offer and the parties have already agreed to the “important stuff” during the offer stage.  However, despite all of this, the tenant refuses to sign the edited lease and walks away from the deal. Can your client – the landlord – save this deal by suing the tenant for breach of the binding offer to lease?

When “NOT BINDING” Isn’t Good Enough

The court would agree that the tenant is in breach of the offer if the remaining 32 edits were minor and immaterial issues and if all of the material matters had been decided. If the 32 edits, or some portion thereof, however, touched upon substantive issues (i.e. material terms) then the landlord (and your commission) is in trouble.  In other words, despite the fact that the offer is binding and that material terms were discussed, if new material issues pop up then the landlord cannot insist that the tenant sign the lease and the landlord cannot sue for breach of contract.

How Can I Protect my Deal?

 To get a deal over the “goal post”, ensure you’ve negotiated all materials terms in the offer stage. To understand what is material, investigate the nature of the tenant’s business, as well as the landlord’s intentions with the property.  Even if you’re acting for the landlord, insist that all parties review the standard lease during the offer negotiations. Taking these steps ensures and protects you from any surprise material issues from popping up and ruining your supposed binding offer.  While this sounds like a lot of work, it’ll certainly be worth it when you hand over the offer to the lawyers knowing that it’s “lawyer proof”.


The Relocation Clause

You’re a professional. You’ve been trained to understand what your client needs. And you know how to find the best real estate. You and your client are excited, you sign the offers and then close the deal.

What you may not know is that you’ve made a big mistake. The lease your client just signed will ruin their business. And they’ll blame you.

This happens frequently when negotiating and signing offers because, although legal advice is advisable, it isn’t practical. Lawyers give complex, lengthy and expensive analysis and slow the deal process. As a lawyer who built and led a leasing department for a private equity real estate investment firm, I saw how lawyers would frustrate everyone; yet, without legal advice major consequences would follow.

Since a lawyer may not be readily available, it’s best to arm yourself with knowledge and think like a lawyer. To think like a lawyer is easy – be paranoid and always think in “worst case scenario”!

The knowledge part, however, can be more cumbersome. So, we’ll start with one clause at a time, beginning with the most frequently overlooked but potentially dangerous clause.

The Relocation Clause

The Scenario

Your client is a hairdresser and her business depends upon walk-ins. She needs foot traffic generated by pedestrian roads and “name brand” tenants.

You find her the perfect unit. It’s right beside a popular café and that faces a busy sidewalk. You sign the offer, but pay no attention to the lease attached to the offer. After all, the terms are fairly standards and you got your tenant a great rental rate.

Three months later the landlord tells her she is being relocated to the back of building where there is no foot traffic and where there are no “feeder tenants”. After 4 months, she loses her business and you lose a client.

What Happened?

You didn’t see the “Landlord’s Right to Relocate” Clause, which stands on its own or can be buried in the “Control of Building by Landlord” Clause.

What is this Clause and Why Does the Landlord Want it?

The landlord will typically want to retain a lot of rights in its maintenance, management and operation of the building. Moving a tenant is central to a landlord’s management of the tenant mix and its ability to make changes to the building. For example, the landlord may want to attract another tenant or demolish the unit to create a larger space for an existing tenant. Given these objectives, watch out for wording that says:

Landlord has the right, on no less than sixty days’ notice, to relocate Tenant (including its subtenants and all other permitted occupants) to other space in the Centre designed by Landlord of comparable size in which the Tenant must complete the relocation within thirty days after the Landlord’s notice. The new Premises replaces the old for all purposes of the Lease.


In the event of relocation, the Landlord will pay to the Tenant on an equitable basis, for capital costs incurred by tenant for new Trade Fixtures as a direct result of such relocation.

Let’s consider our earlier hairdresser scenario. This clause gives the landlord the right to move your client with only 60 days notice. Your client has only 30 days to move, which will completely disrupt her business. The landlord, however, has no obligation to reimburse your tenant for this inconvenience.  The landlord only has to pay your client her costs to change the fixtures in the new unit and nothing else. She doesn’t get reimbursed for her loss of business income, her moving costs or her marketing costs letting her clients know about the move.

What Should You Do?

If you’re representing the tenant make sure that you strike out this clause completely. If the landlord has more bargaining power then you, insist that your client be provided a “turn-key” premises in a comparable location, size, configuration and of comparable accessibility. In other words, if your hairdresser client had this wording, she would have to have been moved to another unit that provided the same foot traffic and feeder tenants that her old unit provided.

You should also make sure that your client is reimbursed for any loss of business income, goodwill or other profits because of the relocation. If the Landlord disagrees with subsidizing these costs, then request that any relocation will only occur if your client agrees to the relocation in writing. The client should also request that all costs, including but not limited to, leasehold improvements and moving costs, be reimbursed as a result of the relocation.

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DISCLAIMER: This article offers general comments on legal issues and developments of concern to business organizations and individuals and is not intended to provide legal opinions. Readers should seek professional legal advice on the particular issues that concern.

Author Biography

Natalka is a lawyer & licensed real estate sales agent who has a passion to make the law accessible & affordable. She founded, hosts & co-produces a popular legal call in show on Rogers TV, Toronto Speaks Legal Advice, & co-founded Groundworks, a firm dedicated to offering practical legal advice that helps agents, landlords and tenants make more, better & faster lease deals. All work is done by legal professionals for a fraction of the price and time of a traditional law firm.

Thinking like a Lawyer but Acting like a Leasing Guru

Should You Waive Goodbye to this Right or Sign a Release?

Most leases require a tenant to obtain insurance that is consistent with the lease terms before it can enter a premises.  Despite this fundamental prerequisite to enter, most tenants fail to meet the lease’s insurance provision. This failure can cause delays in construction, occupancy and the “grand opening”, not to mention tack on “surprise” premium increases. In order to avoid this disaster, a prudent agent will advise her client to have the insurer review the lease and the insurance clause; she will also have a general understanding of some critical insurance terms.

The Right of Subrogation and Releases 

What is the Right of Subrogation?

The right of subrogation is one of the most misunderstood and overlooked rights related to the insurance clause. This right is not the landlord or tenant’s to exercise. Rather, it’s the right of subrogation is the insurer’s right to sue the party responsible for causing a loss or damage. This right arises where the insurer pays insurance proceeds to the injured party to reimburse the insured for its losses due to damage or injury caused by another party. Once the insurer compensates the insured, the insurer then gets a right to “step into the shoes” of the insured and sue the party that caused the loss.  This right makes the insurer “whole” as it recoups its payment to the insured by suing the party that caused the damage.  For example, let’s say that the tenant burns down the building. The landlord’s insurer will reimburse the landlord for its loss of the building. The insurer then gets the right to “step into the landlord’s shoes” and sue the tenant for the money it had to pay out to the landlord due to the loss.

Is this Fair and What Can You Do? 

I believe that right of subrogation is unfair because it allows the insurer to be paid twice; once by the insured and then a second time by exercising its right to subrogation. This outcome, as well as the fact that no one likes getting sued, is why you want to ensure that the parties to a lease both obtain a waiver of subrogation. A waiver of subrogation provision will require the tenant and landlord to get, in writing, their insurers to agree to not sue the party that caused the damage.

Tenants should be particularly vocal about getting a waiver of subrogation if the tenant pays for the landlord’s insurance, as operating costs usually include landlord’s insurance. This is because without a waiver, the landlord’s insurer can sue the tenant despite the fact that the tenant just was the one paying for the insurance!

Do waivers affect insurance costs? 

Most insurers will agree to execute a waiver of subrogation without any penalty or increase in the insurance premium. While tenants are typically required to obtain a waiver, landlords will only agree to “use their best efforts” to obtain a waiver of subrogation from its insurer. This loose language gives the landlord leeway in case it cannot obtain the waiver.

Can a release be signed instead of a waiver? 

A release can be signed instead of a waiver, which simplifies the process of requesting waivers of subrogation from third parties. In fact, most balanced leases have a mutual release clause. This clause releases the landlord and tenant from claims they have against one another, but only to the point that they are insured or are required to be insured under the terms of the lease. In other words, both parties agree to not sue each other if they have insurance that covers the loss they suffered due to the other party’s action.

Releases have the same effect as waivers of subrogation because the insurer’s rights exist only if the insured has the right. If the tenant gives up a right by way of mutual release, then the insurer automatically loses this right as well. Consider a scenario where a tenant signs a mutual release and a few months later the landlord accidentally destroys the tenant’s premises. The tenant may want to sue the landlord, but, if the tenant’s insurance covers the loss, the tenant and insurer cannot sue the landlord. Rather, the tenant’s insurer will have to pay the tenant for the losses, but it can’t exercise its subrogation rights and step into the tenant’s shoes because the tenant has no shoes!

Cautionary Note

Failure to obtain waivers or insurance may be a breach of the lease, which puts an unadvised tenant in a tough position. What is more, many insurers are now refusing to insure tenants who are required to sign a release. Accordingly, it’s not only prudent to ensure that your tenant and has a full understanding of the insurance provisions, but it’s also prudent to ensure that insurer reviews the entire lease and approves all terms before the tenant is bound.

The Mistake: Tenants Need to Know About Estoppel Certificates

We all hear about the big commercial deal where millions or even billions exchanged hands. But what we don’t hear about is an unusual document that can make or break that deal. Yet, few agents not only don’t know about this document and even fewer address this document during lease negotiations. This means that you can be leaving your clients exposed to risk and that you’re not using your full negotiation power to get better terms.

What is this Document?

This powerful document is the Tenant Estoppel Certificate (TEC). The TEC is a legally binding document where a tenant represents or promises certain things to be true. These “things” relate to the relationship between the landlord and the terms of the lease. Common “things” found in TECs are:

  • Dates: when the lease started, when it was last renewed and its expiration date;
  • Rent: how much rent the tenant pays and what’s due over the term of the lease;
  • Defaults: if either party defaulted on any rights and responsibilities under the lease;
  • Contact information: the parties’ addresses, phone numbers and email information;
  • Deposits and Letters of Credit: if any deposits exist and if interest is being collected, how the deposit can be used and so on; and
  • Renewals or Extensions: if such rights exist, the terms and the notification periods.

Why have it?

The TEC is a promise made to a lender or a potential buyer. The lender or buyer want these promises because they support whatever the landlord claims to be true about its leases, rent and so on. Clearly, the TEC is imperative to the due diligence process of the sale or refinancing of a property. After all, if you’re going to spend significant amounts of money, you’ll want the security that it won’t be hit with financially devastating surprises.

In other words, a TEC prevents unsubstantiated surprises because it provides the buyer or lender with a “snapshot” of the status of the lease and because it legally precludes the tenant from maintaining any claims inconsistent with the terms in the TEC.

For example, after we acquired a property, I’d be inundated with tenants claiming they wouldn’t be paying a few months of rent because the previous landlord owed them money for tenant improvements. Before I did a thing, I’d look at the TEC that the defaulting tenant signed. If what they said was inconsistent with the TEC, I’d tell them they had no claim or right to avoid paying rent.

What do I do if I see it?

Recognize this as an opportunity to negotiate in certain terms into your lease. The TEC is very important to landlords and you can use this provision to extract better rent rates or other terms important to the tenant. To be clear, when the obligation to sign the TEC arises it’s not the time to negotiate terms in the lease; rather, it’s just the time to ensure that the terms in the lease are true.

The most common issues related to TECs are who pays for the preparation of the document, how many times the landlord may request a TEC and what terms the tenant will agree to in the TEC. Pay attention to these issues and ensure that you put in as many “caps” as possible. But, this is just scratching the surface….

Many leases will further include a “deeming provision” if the tenant does not object to or execute the draft estoppel within the required timeframe. This means that, if the TEC goes unsigned, the tenant is deemed to have accepted the representations in that draft TEC it received. Some leases will further allow the landlord to appoint its own agent who can sign the TEC on tenant’s behalf. This is highly problematic, especially if the tenant disagrees with the representations in the TEC, because the tenant will be held to the potentially incorrect statements in the TEC. Examples include exaggerated rental rates or the elimination of any specially agreed rights.

Tenant representatives should further request that the obligation to sign an estoppel certificate is mutual. This means that the landlord will also have to sign an estoppel certificate should a prospective subtenant request one, for example. Also, request that both parties must agree to all of the terms in the TEC, that the tenant has a right to add in her own comments and that the default isn’t the landlord’s standard TEC. This ensures that the tenant isn’t unwittingly held to certain representations that are inaccurate and can advise the potential purchaser or lender if the landlord is not upholding its obligations.

Consider how much time the tenant has to review the TEC and what happens if the tenant doesn’t respond on a timely basis. Ensure that you define your review period as X “business days” to avoid getting confusion over whether or not holidays and weekends are included in the calculation.

Finally, delete any language that deems the draft submitted approved or appoints an agent to sign the document should the tenant not reply in a timely manner. As mentioned, above, if the tenant misses the opportunity to review the document this may hold her to unfair or untrue terms.

What should I tell my tenant to do when the obligation arises?

If you think a tenant doesn’t have to provide a TEC, think again. The power to require a tenant to sign a TEC typically stems from a term in the lease, as alluded to above. And not providing a TEC could result in serious repercussions.

Distinguish yourself as an excellent agent by guiding your client through the potential pitfalls of a TEC. Consider the following as you help:

  • Ask the tenant if she received the certificate under the stipulated time period and in the form that the lease provides. You want to make sure your tenant was given enough time to review the document and the landlord may have put itself under an obligation to provide the TEC a certain number of days before the TEC must be executed.
  • Review not only the lease, but also all of its amendments. Compare the terms of these documents to the estoppel provisions to ensure accuracy. For example, check that the names and addresses of all parties are correct and that all documents are included in the definition of “Lease”. I’ve come across missing documentation during this process which could be problematic if there is a foreclosure or need for refinancing.
  • Confirm that the landlord hasn’t defaulted on its obligations. Speak with other tenants and walk the property to determine if the landlord has not yet fixed a defective HVAC, for example, as required under the lease.
  • Be sure that the TEC reflects any special terms negotiated between the landlord and tenant. For example, does the TEC include the tenant’s option to renew, expand or terminate early, as well as any tenant improvement rights, self-help remedies and audit rights? Confirm that the TEC doesn’t negate any of these rights.
  • Be specific when responding to any statements requiring the tenant confirm that the landlord has not defaulted on its obligations “to the best of tenant’s knowledge”. The tenant may only have knowledge about specific types of landlord obligations, especially if the tenant operates in multiple facilities.
  • Confirm how much the tenant is paying by contacting the tenant’s accounting department and reviewing the latest rent invoices.
  • Don’t let any landlords pull a fast one by using the TEC as an opportunity to expand the tenant’s obligations or delete the tenant’s rights. If something is unclear, qualify the language be inserting “as required under the Lease….”

Remember, success in the real estate business is all about the value you can provide to your client. By knowing a bit more about the secret TEC you’ll be sure to stand heads and shoulders above the crowd, as well as protect your client.