In 8750297 Canada Inc. v. Ambassador Realty Inc. (2025 ONSC 5479) (“Ambassador Realty”), the Ontario Superior Court of Justice considered whether a long-standing commercial tenant that missed a renewal deadline could nonetheless preserve its lease. After considering the context, the parties’ prior renewal practices, and their actions regarding this renewal, the Court ultimately ruled in favour of the tenant and declared the lease renewed, despite technical non-compliance.
The decision provides useful guidance on when equitable relief may be available to a tenant under the Commercial Tenancies Act, R.S.O. 1990, c. L.7 (“CTA”) and the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”) and reinforces the importance of clear, consistent communication between landlords and tenants during the renewal process.
Background
The applicant was a numbered CBCA corporation that ran a well-established pizza restaurant in the City of Ottawa. The business originally occupied its premises under a lease signed in 2006 by the previous franchise owner. In 2012 and 2017, the lease was renewed – in each case after a reminder letter had been sent, a few weeks prior to the deadline, reminding the applicant that it had to provide written notice of its intention to renew.
Although the applicant had operated the restaurant since 2012, the lease was not actually assigned to it until 2021, under an agreement that (i) extended the term of the lease to August 31, 2025 and (ii) gave the applicant a unilateral right to renew for a further five years, provided written notice was delivered by December 31, 2024. After the assignment, the applicant spent a considerable amount of money renovating the restaurant and informally expressed his intention to remain in the premises for the long term to representatives of the respondent.
As the 2025 renewal approached, however, the applicant did not send the required written notice by the December 31, 2024 deadline. On February 4, 2025, the respondent notified the applicant that the lease would end in August. The principal of the applicant (“Mr. Yahia”) replied the same day, confirmed his intention to renew, explained that he had been ill, and asked that the renewal agreement be sent for signature. The respondent maintained that it emailed the following evening to advise that the premises had already been leased to an adjoining tenant, a bakery that wished to expand its operation. The applicant stated that it had not received this email.
The applicant followed up in June 2025, only to be told that vacant possession would be required at the end of August. Having invested approximately $100,000 in improvements to the premises and faced with the loss of his business location, the applicant commenced an application for relief from forfeiture under Section 20 of the CTA and Section 98 of the CJA.
Ontario Law on Relief from Forfeiture
Commercial lease renewal options are treated as contractual rights and generally require strict compliance with their terms. If a tenant fails to provide written notice on time, the renewal option is normally lost.
However, Section 20 of the CTA and Section 98 of the CJA give courts a narrow discretion to grant relief from forfeiture in limited circumstances. In deciding whether to grant relief, courts can consider whether the breach was inadvertent, the tenant acted promptly once aware, and whether the landlord is unfairly prejudiced (for example, if the landlord leased the premises to someone else in reliance on the tenant’s failure to exercise its option).
Although relief from forfeiture is rarely granted with respect to the improper exercise of a renewal, the remedy is available in cases where strict enforcement would produce an inequitable outcome.
Reasons for Granting Relief from Forfeiture
The central issue was whether the applicant could be granted relief from forfeiture despite missing the renewal deadline. The Court held that the lease remained valid until August 31, 2030, as if the renewal option had been exercised on time. The Court found that the equities favoured the applicant.
Applicant’s previous expressions of its intention to renew
The Court accepted that the applicant always intended to renew. It had operated the restaurant for 12 years, spent significant money on renovations at the time of the assignment, and consistently communicated a desire to stay in the premises. The applicant had testified that it had also told the property manager of its intention to renew while major renovations were underway, but the property manager indicated it was too early to renew.
Failure to renew not a result of indifference or “hedging bets”
The missed deadline stemmed neither from indifference nor from any effort by the tenant to “hedge its bets” – significant factors in previous cases in which relief had been denied – but rather from Mr. Yahia’s illness, which was confirmed by medical evidence that referred to symptoms that impaired alertness, memory and routine functioning. The Court accepted that this condition contributed to the failure to send timely written notice.
Expectation of receiving a reminder about renewal was reasonable
The expectation of a reminder was also reasonable in the circumstances. Although the respondent had no legal obligation to provide one, it had sent similar letters on at least two previous occasions, including when the applicant was already occupying the space. This established pattern informed the applicant’s belief that he would again receive notice before any renewal steps were required.
Duty of honest performance considered
The Court also noted concerns about the respondent’s conduct. Its statement that the premises had already been leased to the bakery by February 5, 2025 was inaccurate as the lease was not signed until March 7, 2025, which was after the applicant indicated it did wish to renew. This did not reflect the duty of honest performance described by the Supreme Court in Bhasin v. Hrynew (2014). The applicant also denied ever receiving communication about the lease with the neighbour, and there was no evidence of any attempt to mislead on the applicant’s part.
Hardship to applicant outweighs any prejudice to the new tenant
There was also little evidence of prejudice to the neighbouring bakery that had signed the new lease. The Court found no evidence that the bakery would be unable to continue operating in its current premises. By contrast, the applicant faced significant hardship. The Court also noted that the applicant made efforts to mitigate losses and secured a secondary location but would have significant start-up costs.
Other cases distinguished
The Court distinguished several cases where relief was denied. In those decisions, tenants had failed to act diligently, had multiple rental defaults, or were sophisticated commercial parties who knowingly ignored their obligations. None of those factors were present here. The applicant was a first-time commercial tenant who acted in good faith, took prompt steps once aware of the issue, and came to court with what the Court described as “clean hands”.
Conclusion
This decision illustrates how relief from forfeiture can protect commercial tenants where missing a renewal deadline was inadvertent and strict enforcement would be unfair. But renewal options must still be exercised and treated with care by all parties – relief from forfeiture is a discretionary remedy and this decision emphasizes the importance of clear and honest communication, as well as the need to approach renewal periods with care, especially where past practices may influence expectations.
The authors would like to acknowledge the support and assistance of Emily Feng, student at law, in the preparation of this publication.
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