Executive Summary: Key Legal and Evidentiary Issues

• The lease did not include the basement, and its use by the tenant was found to be unauthorized.

• DFIV Corp. breached the lease by installing heat pumps and placing equipment in the basement without the landlord’s consent.

• Turning off air conditioning to the upstairs residential unit constituted a nuisance, breaching the lease under Section 36.

• The tenant failed to prove any implied term allowing basement use or any breach by the landlord of quiet enjoyment.

• Landlord properly served two Notices of Breach under the Commercial Tenancies Act, satisfying statutory requirements.

• The court upheld the landlord’s right to terminate the lease and retake possession, effective April 17, 2025.

Facts and Background

Danica Schindler, the landlord, applied to terminate a commercial lease with DFIV Corp., which operates a Pizza Hut at 329 Lakeshore Road East, Mississauga. The dispute arose when the tenant began using the building’s basement—accessed only through the leased space—for equipment storage, including grease traps, refrigeration units, and a modem, despite the lease specifying only 950 square feet on the main floor.

The tenant also installed ductless air conditioning and heat pumps on the building's exterior without the landlord’s consent, and disconnected air conditioning to the upstairs residential tenant. The landlord claimed these actions violated the lease and caused nuisance.

The tenant counter-applied, alleging that basement use was orally agreed upon or implied, and that the landlord breached the lease by not ensuring adequate HVAC and by interfering with quiet enjoyment when access to the basement was restricted.

Legal Arguments

Landlord’s Position
The landlord asserted that:

• The basement was not part of the leased premises, as per the written lease.

• The tenant placed equipment in the basement and installed external HVAC systems without consent, violating Section 30(f).

• The tenant disabled the air conditioning for the residential tenant above, causing a nuisance under Section 36.

• Two valid Notices of Breach were issued, and the tenant failed to remedy the defaults.

Tenant’s Position
DFIV Corp. argued that:

• Use of the basement was either implied in the lease or verbally agreed upon.

• Landlord failed to supply adequate air conditioning as required at the commencement of the lease under Section 17.

• The lock on the basement door constituted a breach of quiet enjoyment.

• The city allegedly required the equipment to be stored in the basement, with the landlord consenting by signing rezoning paperwork.

Court’s Analysis and Findings

Inclusion of Basement in Lease
The court found that the lease unambiguously excluded the basement, as it specified 950 square feet—the area of the ground floor only. The argument for an implied term failed under both the business efficacy and officious bystander tests. The court noted that the tenant, an experienced franchisee, should have ensured any essential use of the basement was explicitly included.

Lease Breaches by Tenant

• The court accepted the landlord’s evidence that she had not consented to equipment being stored in the basement or to the exterior installation of heat pumps.

• The court held that these actions violated Section 30(f) of the lease.

• The court also found the tenant breached Section 36 by cutting off HVAC access to the upstairs unit, creating a nuisance.

• The court rejected the tenant's defamation and misrepresentation claims.

Landlord’s Conduct

• Locking the basement door was found not to breach the tenant’s right to quiet enjoyment.

• The tenant’s claim that the landlord breached her duty to provide a working HVAC system was rejected due to insufficient evidence.

• The court accepted the landlord’s position that the tenant failed to maintain the HVAC system, as required under Section 17 of the lease.

Outcome and Orders

The Ontario Superior Court ruled in favour of the landlord:

• Declared that DFIV Corp. breached Sections 30 and 36 of the lease.

• Found the landlord did not breach the lease or misrepresent the leased premises.

• Dismissed the tenant’s application (Court File No. CV-24-897).

• Authorized the landlord to retake possession of the premises effective April 17, 2025, pursuant to Section 23 of the lease.

• Adjourned the landlord’s motion for special damages related to equipment removal and property repair sine die, pending future developments.

The court encouraged the parties to agree on costs, with a submission deadline set if no agreement is reached. No specific monetary award, costs, or damages were granted at the time of the ruling.