A recent decision of the Court of Appeal for Ontario (the "Court of Appeal") has shed light on parking rights for both landlords and tenants under a commercial lease. Metro Ontario Real Estate Limited v. Embee Properties Limited (2024 ONCA 51) concerns a dispute over a shopping centre's common parking lot area. The appellant and owner of the shopping centre, Embee Properties Limited ("Embee"), wanted to expand the shopping centre to accommodate retail space for a new tenant, the Liquor Control Board of Ontario. The expansion would require the reconfiguration of 36 parking spaces directly adjacent to a grocery store operated by Metro Ontario Real Estate Limited ("Metro"), one of the existing tenants of the shopping centre. Metro objected to the expansion, claiming that such an expansion "impermissibly interfered" with the parking spots Metro is entitled to for its customers under its lease agreement with Embee.
Metro brought a successful action to determine its parking rights in the common parking lot. The lower court judge found that Metro's interest in the common parking lot area was both a leasehold proprietary interest and an easement, thus determining that the shopping centre's expansion would violate Metro's rights. The remedy granted by the court was a permanent injunction preventing Embee from reconfiguring the parking spots.
However, on appeal, the Court of Appeal set aside the lower court judge's order and concluded that the lower court judge erred in law in his finding that Metro had a leasehold proprietary interest in the common parking lot area. The Court of Appeal stated that a leasehold proprietary interest (i) arises under the terms of a binding lease agreement, and (ii) provides a tenant with an exclusive right to possess, occupy and use the property in question. Furthermore, a leasehold proprietary interest exists against all the world, including the landlord, meaning that any interference by a landlord or third party would constitute a trespass.
In the case at bar, the critical element of exclusivity did not exist because all the tenants in the shopping centre had a right to use all the parking spots for their customers. The Court of Appeal specifically stated that "Metro did not have any contractual right to particular parking spots or particular locations for those parking spots. It had the same rights as all of the other tenants, that is, general access to all of the parking spots provided."
What Are the Implications for Landlords and Tenants of Multi-Tenant Commercial Leases?
The Court of Appeal's decision serves as a guideline for how courts interpret leasehold proprietary interests for both landlords and tenants in the context of a multi-tenant commercial property. If you are a tenant and exclusive parking spots are a critical element for your business operations, your lease must be carefully drafted to provide exclusive parking spots. On the other hand, if you are a landlord, this decision serves as a warning that granting exclusive rights in a commercial lease may impede future development plans at your property.
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