Property Winter 08

Re Pylypow et al . and Public Trustee, pg. 55 Heller v. The Registrar, Vancouver Land Registration District , pg. 58 R. FRAUD , pg. 63 Holt Renfrew & Co. v. Singer and Pekarsky S. FORGERY Void Agreements and Forgery: Deferred or Immediate Indefeasibility Registrar of Regina Land Registration Dist. v. Hermanson de Lichtbuer v. Dupmeier et al T. The Necessity of Registration Equitable Interests and Interests off the Register Problem, pg. 102 The Severance of Joint Tenancies and Land Titles JeLDett v. Wilkie Protective Holdings Ltd. v. M & P Transport Ltd . U. CAVEATS Is it a Caveatable Interest? Frado v. Bank of Montreal Calford v. ZeLDers Prudential Insurance Company of America v. Junak; Mamczasz v. Bank of Montreal Holt Renfrew v. Singer V. Establishing Priorities Among Competing Interests McKiLDop and Benjafield v. Alexander Re Royal Bank of Canada and La Banque d’Hochelaga; MuLDer v. Scwhalbe Esso Resources Canada Page 3 of 137

S.1 ALL leases or any uncertain interest relating to land must be in writing and signed by the parties.  Consequence where it is not in the prescribed form the interest can be no greater than a tenancy at will.  If not signed then it creates a tenancy at will, and that allows the tenant to be booted by the landlord at any time or vice versa it allows the tenant to leave  If I then pay you 1 year rent and you accept it then the agreement becomes a periodic tenancy on a year to year basis.  If agreeing to an oral lease of exactly three years it is caught by s 1, but then exempted by s 2. S.2 (exceptions to S.1):  Notwithstanding s. 1 if the term is not exceeding 3 years from the making of and where the rent reserved is at least 2/3 of the value of the thing demised, then it is not a tenancy at will (even if not signed) it is a valid agreement  2/3 full improved value can mean two things: o 2/3 of the market value o 2/3 of the rental value – this is the meaning used by the court  Can only be for 3 years or less 1. SOF does not apply if the tenancy is for less than three years  Note: a 3-year lease is insufficient for this exception (RJ Sheppard)  What about periodic tenancies that can be extended past three years via an extension? - RJ Sheppard establishes that if the lease can be extended, the initial period must be less than three years in order for the exception to apply.  Note that this is inconsistent with landlord tenant theory that states that renewal is not the creation of a new contract 2. and the rent reserved to the landlord amounts to 2/3 of the full-improved value of the demise  Applies to 2/3 full-improved market value annually in rent not the actual value of the demise.  Note: S.2 brings the SOF in line with the land titles act. This act gives the newly registered owner full rights to the property and no rights to any unregistered parties.  S.65 of the land titles act states that it does not apply to leases less than three years S. 3 Specifically directed to transfers by assignment or surrenders. States that assignments of existing estates to transferee must be by deed or note in writing signed by the parties. If it is not, then it will be void. S.4 This clause does not add any substance and is intended to be purely procedural  Difference b/w s.4 and s.3, 1 is that #4 is a procedural requirement.  Bars the enforcement of purely parol agreements relating to land, there must be some evidence in writing to enforce it  Does not say that the agreement is void rather it states that you cannot bring an action based on it. Thus one must resort to equity  Allows a lease to exist in equity (overrides need for seal - ( Walsh )  Even if s. 1 and 3 don’t apply if you don’t have something in writing you cannot sue them Equity: Can get around the procedural barrier posed by s.4  How : Equity will get around this little barrier simply by ordering a written agreement in the form prescribed by the statute of fraud if is sees fit to do so  When : Equity will intervene when sufficient acts of part performance such that it would be inequitable not to ascribe specific performance.  If equity sees that there has been part performance then equity will grant relief against the prohibition to sue in s .4 of the SOF and order the parties to do what should be done in terms of equity. - Equity does this by ordering specific performance . The Real Property Amendment Act, pg. 8 States that any lease of 3 years or more must be carried out by execution of a deed Deed: (def’n) An instrument in writing that conveys an interest in land from the grantor to the grantee; an instrument used to effect a transfer of realty. Its main function is to pass title to land. Beemer v. Brownridge , 1934, Sask. C.A., pg. 9 (doctrine of part performance) Facts: In 1914 the plaintiff and his wife bought land. He provided 60% and she provided 40% of purchase price of land. But title was only in the wife’s name alone. There is a common law presumption of advancement that if the title is in the wife he intended to make a gift of the property to his wife, so 60% interest was a gift to wife => she is the absolute owner of property. Mr. B alleged that Page 6 of 137

 A and C had an agreement but it was never executed (signed)  C paid money to A and it became a 1 year periodic tenancy under law  English jurisprudence Hand v Hall – a periodic tenancy automatically renews unless the landlord or tenant give notice of the termination  S 95 LTA provides that where a lease is for more than three years then the LD and T must enter into a Kn where a leasehold title can be issued. In practice this is rarely done. The T will usually file a Caveat against the LD land pursuant to the lease held by the T  S 61 of the LTA provides that where a lease does not exceed 3 years and the tenant is in occupation, Then a purchaser cannot enforce their indefeasible right to occupation of the property. D. The Role of Equity Equity: (def’n) Primarily justice or fairness. Equity means to do to all persons as we would have them do onto us. It may be used to mean the discretionary power to do justice in particular cases where strict rules apply. Some of the fundamental principles of equity:  Was a petition from the king to the chancellor over an act that was deemed unconscionable – then the chancellor would put forward an order if it to his judgment it was an unconscionable act.  Chancellor was the keeper of the Kings seal. If a document did not have the seal then it was not a Crown document. Where a pl wished to obtain a writ to sue, that pl applied to the chancellor who issued the common law writ.  Where law and equity collide – equity prevails o Only prevails when in fact law and equity collide, and in order to avoid that collision equity adopted a principal that it will defer to the common law when possible. This avoided the collision  A party who seeks equity must do equity-it is mutual  Equity and its remedies is always a matter of discretion. o That is the focus of equity – focus is whether or not either of the parties is worthy of an equitable remedy.  Every single case of equity is a discretion of the court  Equity will never grant an equitable remedy if it thinks that damages is a viable remedy  If damages are not an adequate remedy, equity will always balance the equities b/w the plaintiff and the defendant  An equitable remedy will only be granted when if it is not granted it will cause harm to one of the parties  Equity will only grant a remedy of equity when the balance of convenience deems it to be proper  Equity is more of a remedy not a right  Anytime a litigant wanted a settlement other than damages they had to got to a court of equity  Equity is a system of law to relieve against the harshness of the common law.  One must come to equity with clean hands. Equity will not intervene when the party seeking equity has acted inequitably  Equity will not assist a volunteer-very important  Equity will follow the law but not slavishly  Delay in asserting equity will defeat equity.  In order to obtain an equitable remedy, it must be shown that damages are insufficient.  Important Events in the growth of Equity: o Most important Case is the Earl of Oxford Case(1615) o Advent of publishing the decisions of the chancellor – we then had written documentation of equity that could be used as precedent, the result was that by the 19 th century we now had to substantive bodies of law (a) common law (b) equity o Chancellery Amendment Act – gave powers to the chancellors that were previously in common law. Most important was that equity could now give remedy of damages o Judicature Act – created supreme court of judicature, this court had jurisdiction to administer both the common law and the law of equity  The common law is a system that focuses on rights and a remedy flows from that right, Equity looks at a remedy, remedies such as: o Specific performance o Injunction o Equitable Damages o Equitable Restitution  From in its inception the role of equity has been to act in situations where the conduct is unconscionable  James I decided: When law and equity conflict – equity prevails.  Defining feature of equity is discretion, conscience, complete justice-the maxims of equity relate to these Page 9 of 137

 A court of equity will only award specific performance if there has been sufficient part performance of the agreement. If there is sufficient part performance, the Statute of Frauds won't apply.  To determine if there has been sufficient part performance, must consider: 1. Whether or not there is conduct that can be attributed to their agreement and only to their agreement, and 2. The parties actions before entering into the agreement. Ratio: An agreement to lease is as good as a lease if and only if a court of equity will order specific performance of the agreement (s.4). Where a tenant enters into possession under an agreement to lease and pays rent to the landlord that is accepted by the landlord, a court of equity will order specific performance of the agreement to lease. CANS:  At common law the only way you can create a legal relationship is a deed under seal  Is an agreement to lease as good as a lease – the answer is yes only if a court of equity would grant specific performance as an equitable remedy. The effect of that is to force the parties to specifically perform what the agreement entitled.  Only a landlord who has a legal landlord/tenant relationship is entitled to claiming duress. That means there needs to be a demise from the landlord to the tenant  This is a procedural remedy case – no decision in the court, they gave an equitable remedy and preserved the status quo  Ian asks could there have been a statute of frauds issue here? S.1 of the SOF says that any dealings of land must be writing, why isn’t the SOF invoked? o B/c there were sufficient acts of part performance  Tenant lived there and paid rent, the conduct was exactly what both parties agreed on?  Ian asks why this problem arose in the first place. Why are they in court from a practical point of view? o The lessor paid off his the mortgage, now wants the rent as it would be given in a landlord tenant relationship.  Court asked o What were the effects of the judicature act?  Prior to the JA this case would have had to been filed into two separate courts. But b/c of the court of judicature the matter could be heard in one court. Provided that prior to the JA if a court of equity would grant an equitable remedy so would this court o Did the JA change the substantive part of law in regards to what is a matter of equity and what is a matter of law  No – the substantive part of the law is the same  In order to claim duress then L needed to have a legal landlord – tenant relationship.  In regards the whether the agreement was legal or not Walsh argued that it could not be legal because they did not have an executed lease agreement. But b/c the landlord accepted the rent it created legal periodic tenancy  Remedy of Duress in Alberta o Relationship must be a legal relationship o Termination and Duress are mutually exclusive b/c duress arises out of the landlord/tenant relationship so if the landlord terminates the tenancy then there can be no claim of duress b/c the relationship has demised o Residential Tenancy is governed by the residential tenancies act. The remedies there are provided in s. 25 & 26. And that RTA is silent on this issue of whether a remedy of duress can be claimed CLASS: must ask would a court of equity order specific performance? -payment of rent is important in this case because the lease was supposed to be drawn up to call for the payment of rent in advance. On this it looks as if the payment of rent should be in advance between W and L. -at common law a mortgage is a conveyance of the owners interest in land. There is a clause in the mortgage where the owner conveys the fee simple to the mortgager. Payment is in arrears -once Lonsdale paid off the mortgage the fee simple transferred back to him and he demanded that the rent be paid in arrears. -when the demand for payment in advance was not made, the lessor exercised his right of distress which was the common law right given to a landlord to seize and sell any goods of the lessee that are found on the leased premises where the lessee is in arrears of the payment of rent. -remedy of distress is a legal not an equitable right or remedy -the lessee argued that because distress is a legal remedy and because they did not execute a legal contract and instead have an equitable agreement, and since distress is not equitable, the lessor cannot rely on an legal remedy and that it must be equitable instead. -an agreement to lease is as good as a legal lease if an only if the court would enforce the lease -on the facts this is a good case to enforce specific performance. -lessor does not have the legal remedy of distress and an exercise of it would be wrongful -distress is a self help remedy that the common law gives to landlords when the tenant is in arrears -it makes no reference to the LD right of distress in the RTA. Page 12 of 137

Looked at the diff between tenancy (agreement for a term of years with a grant of term of years with a right of exclusive possession) and lease. But there are other legal relationships that have exclusive possession but don’t = a tenancy. There may be a specific occupation that may not = a tenancy. We need to look at the terms of the agreement, the purpose of it and all of the surrounding circumstances to see if the intention was to create an estate in the tenant. How does one determine the intention to create an estate, SM says the intent to create an estate must consider the mentioned ideas. Terms of the agreement aren’t conclusive, it’s a matter of substance, not form. Even tho the last statement says “I’m a tenant” none the less the court says the agreement – taking into the account the purpose – to provide a residence for Ms. S – and taking into account the rights of Mr. S in relation to the occupation of the premises and rights to enter the premises – notwithstanding the express language in the agreement the people entered into a tenancy and not a licence. Matter of SUBSTANCE and not form.  What does Metromatic find? Habendum: “to have”, the clause in a deed that determines what estate or interest is granted by the deed. Demise: A term used to describe the conveyance of an estate in real ppty. Most commonly used in a lease as a synonym for “let” – i.e. to grant a lease. MH focused on the use of words such as demise, lease, habendum, and a covenant of quite enjoyment = these words are conclusive of the creation of a LD-tenant relationship unless in the absence of a clear statement of the parties intention to the contrary. Only ppty documents have habendums. If you use the right words and form it’s a landlord-tenant relationship unless there is a clear statement of contrary intention. The statement of intention would override the words used. The court took more of a contract approach because it was a commercial purpose therefore the necessities of contract should carry more weight than the legal consequences that flow from the law of ppty. o Where though in SM, it’s not a business deal where we need certainty, it is at its essence a ppty relationship, to provide a home for this person and therefore principles of contract – equality of bargaining power, freedom of contract, the ability to negotiate from positions of equal strength, the ability to make trade offs in negotiations o Exclusive occupation that’s not a tenancy – a fee simple, a mortgagee where a mortgager defaults in payment, o The essence of a lodger and a licensee is w/o/n the LD is allowed to tend on or provide services in exclusive occupation. If they must provide services that party is none the less a lodger or licensee. o Where the surrounding circumstances show that there was no intent to enter into any legal relationship at all – such as someone allows someone a person to stay on their ppty out of charity – rule of the soft-hearted LD – why saddle that person with all of the burdens of a LD-tenant relationship. o The family relationship exception, the family relation isn’t a separate category – they don’t intend to enter into a legal relationship. Has nothing to do with whether payment is involved. Errington – got possession of the house – not a LD-tenant relationship – she got an equitable interest in the ppty because the widow was not a bona fide transferee for value when she received the house thru the will, the interest binding against the deceased and therefore this binding interest transferred to the widow. They have no interest at law, the law says look to title. The common law would thro it out. The law of equity acts on the conscience – what ought to the done will be done – by making the payments and the deceased’s promise Mr. Errington separated has an equity that is binding on the widow. Legal title is free and clear if there is a bf transferee for value without notice. She was bound because of notice of that equity. The widow couldn’t ignore the interest of her daughter-in-law. An injunction was granted to the daughter-in-law. EEW didn’t address – is it an in rem equity (that is good against the world because it’s recognized as an interest against the land)? If the widow sells to a 3 rd party – is the party bound by the equity – could the 3 rd party claim the status of a bft for v without notice? There is actual and implied and constructive notice. If a 3 rd party buys it and says “I never saw the ppty – didn’t know someone else was living there – no evidence of another interest in the ppty – therefore no notice of the interest – when someone is in occupation of the ppty then that occupation implies notice of the interest. By virtue of the daughter-in-law’s possession it is implied that you had possession. The cl would say – could you have made inquiries and had you made them you may have found some evidence that the entire interest was just the widow’s and if you’d made then you would have been informed. Therefore because you didn’t, you have constructive notice. Under the LTA the bftfv is a god and you will take title from the widow you get indefeasible title. At common law you would have to do research. o As soon as it was established that she has equity – she should go to the LTO and place a caveat on the title. To file a caveat you must have an interest in land recognized by the general rules of ppty (not only a mere equity). The caveat would be invalid otherwise. The remedy the daughter in law has is against the widow and not the 3 rd party. o Must be in every LD-tenancy relationship exclusive possession in the tenant! If there is exclusive possession, it doesn’t mean it’s automatically a LD-tenant relationship. Then must look to terms and purpose and surrounding circumstances to determine whether the intent of parties was to create a tenancy. o Ian says MS and MH are consistent – the only relevant intent is that which is found in the language found in the agreement between the parties. Simply by saying here’s the label that will not determine the intent, the agreement as a whole must be looked at etc. it is that which determines the intent of the parties. MH is more sensitive to the Page 15 of 137

 Assignment: An alienation of the balance of the remaining term o Distinction between the two is a matter of law and not intention  Security of tenure of a tenant was of relatively little concern to the common law. As a result, England enacted significant legislation to ensure security of tenure. In Alberta, the only security of tenure provisions is found in the Residential Tenancies Act .  At common law the T and the LD can transfer their interests without informing the other party. Take a look at pg. 36 of the materials clause 4.09.01  S. 21 of the Residential Tenancies Act says that a tenant cannot sub-let without the written consent of the landlord but goes on to say that the landlord cannot withhold consent without providing reasons (written reasons) o What happens if the landlord does not provide written reasons  Then the tenant can apply to the court when there has been a breach of the obligations of the landlord for:  Recovery of damages  Compensation of the Court hearings  Termination of the lease  Ian says that this is a gap in the act  For those tenancies governed by the common law (all those tenancies that are not residential) there is nothing at common law that prevents the tenant from completely restraining the tenant’s alienability interests. Alienability :  Can a landlord or tenant transfer his interest?  Are leasehold estates alienable to the same extent as freehold estates? o YES to both questions.  Alienability applies to landlords and tenants, with one exception. In the absence of an express agreement of the parties, both the landlord's and the tenant's interests are freely alienable.  However, if the parties expressly agree that neither can alienate their interest, that condition is valid and the agreement will not be struck down for a restraint on alienability.  A standard clause that is used in such cases is "neither party will dispose of their interest without obtaining the written consent of the other party. This consent is not to be unreasonably withheld." BUT at common law, the landlord is not required to give reasons for withholding consent. He can just say, "I don't consent and I'm not acting unreasonably." and then it's up to the tenant to show that he is being unreasonable.  Parties to the Kn are free to impose whatever terms they wish on alienability.  Most frequent alienability of a LD rights are done by sale. This is an absolute transfer of interest. What are the forms of transfer in the landlord-tenant relationship? 1. Assignment. 2. Sub-lease. It is crucial that the transfer be properly characterised as either a sub-lease or an assignment. Assignment - A transfer where the landlord or tenant does not retain any interests whatsoever in the term of the original tenancy. This is a matter of substance, not form and it does not matter what the parties intention was. - Is the only way a landlord can transfer his interest. - A tenant may use either assignment or sub-lease to transfer his interest. Sub-lease - A transfer where the tenant retains some interests in the original term of the tenancy. - As a matter of substance, it is absolutely immaterial how long the tenant retains a reversionary interest in the original term. 1hr out of a 99yr lease is enough - If the term in which the sublease is carved out of is terminated for reneging on rent then all the subleases under the lease that has reneged the rent are terminated. ANALYTICAL FRAMEWORK FOR TRANSFERS  MUST DIAGRAM THESE  When a land lord gives a lease to a tenant he is carving out a leasehold estate out of his fee simple o This landlord to not have a fee simple absolute in possession but he has a fee simple absolute in reversion The enforceability of covenants depends on the privity relationships between the parties. You must be able to diagram the relationships in order to show where there is privity of contract and where there is privity of estate . Page 18 of 137

 S – burdened by covenant- such as architectural controls put in place in developments  If you have privity of estate: o Only have to show one of the four aforementioned to sue  If you have privity of contract you need to show nothing to be able to sue. There must be a dominant tenement and a serviant tenement, there must be one party that benefits from the ppty and one party that is servient and is therefore burdened by the covenant, the servient tenement. The covenant must be expressed to show an intention that it is to run with the land in the sense that the original parties intended that it would be binding on whoever took possession of the dominant or servient tenements. For a covenant to be a true and restrictive covenant it must be a negative and not a positive covenant. A covenant is negative if it limits or restricts the use to which the land can be put. The most common restrictive covenants are covenants that are imposed by developers by subdivisions designed to protect the external appearance of the homes (to preserve ppty values of all houses in the subdivision). It it’s a positive covenant – must build a wall to separate ppties – if he doesn’t build the wall and sells it – the 3 rd party isn’t bound by it because there’s no privity of contract or estate. But the covenant in question doesn’t take away from the rights of a tenant therefore is not likely a restrictive covenant – a negative covenant. The test – is the effect of the covenant to restrict the exercise of the rights of a fee simple owner? Analytical Framework: where there’s been a transfer of the LD or tenants’ interest 1. Simplify the fact situations: a. Is it an assignment or a sublease? If by the LD then it’s an assignment. If there is no reversion then the intention of the parties is irrelevant then it’s an assignment. Where there was the retention of reversion, then it’s a sublease. b. Identify the privity of contract and estate relationships: who has reversionary interest? 2. Apply basic principles of who can sue and be sued . Gaumont v Luz (1980) 24 A.. 609 (Alta CA) POSTED TO BLACKBOARD Property in question owned by three people as joint tenants. This was a ¼ section of land with gravel pit. AB and C entered into a 5 year lease with Gaumont which allowed him to extract gravel at a rate of 15 cents per ton. Immediately on entering the lease Gaumont was entitled to renew for a 5 year term provided he did so prior to the expiration of the lease. Gaumont entered into negotiation with Currie to transfer his interest to Curie. They agreed that Gaumont’s interest would be transferred to Currie who then transferred it to his company, Dried Meat Gravel, which then conveyed to another of Curries companies called CMM, and then to CM(Edmonton) ABC | | Gaumont-----C-----Dried Meat-------CMM-------CM(Edmonton) CM Edmonton then attempted to exercise the right to renew the transfer. ABC took the position that all the assignments were subleases. ABC objected to this because they were to receive 15c per ton and then up to 25 c per ton on renewal. Gaumont had it worked into his assignment that he would receive an additional 10 c per ton from C and his other assignees. C’s assignments to his company tried to cut Gaumont out to save money per ton Class: The value of this case is whether AB and C are bound by the assignments. In thinking about the enforceability of tenants rights as assignees it is important to assess the nature of the rights that are assigned along with the lease . Through the chain of assignments the last assignee acquires the IN REM rights that were subleased to the original lessee. The right to renew is a personal right given to Gaumont. Gaumont purports to assign that personal right. To sue to enforce that right it is a chose in action. To sue for possession it would be a chose in possession. Always ask if the assignee of the tenant can enforce whatever choses in action have been assigned by the tenant to the assignee. The tenant has assigned his contractual rights that arose out of the original Kn with the lessor. Where there is privity of estate between the assignee and the lessor then they can sue. A right to renew is a personal contractual right , not an in rem right that can be enforced through privity of estate. Page 21 of 137

A chose in action may be either a legal chose in action or an equitable chose in action. If it is a chose inaction that is enforceable at common law it is legal. If it could be enforced in a Court of Chancery it is equitable. An agreement to lease that is being enforced is an equitable chose in action. The general principle at common law of the enforceability of a chose in action is that a chose in action was unenforceable at common law by an assignee. In order for an assignee to enforce a chose in action, the common law would not enforce the legal or equitable chose in action because the common law takes the view that assigning a tenants rights is the assigning of personal rights to another. To enforce a personal contractual right only the original parties could do so. An assignee cannot enforce a cause of action at common law. Where it is equitable and where an assignment is absolute then the assignee may sue in equity in the assignees own name. To sue at common law for a common law cause of action the assignee needs the cooperation of the original tenant who would then have to bring the suit. Equity can also require the original tenant to join with the assignee as a co-claimant. S 20(1) of the judicature act creates a legal choses in action. As a result of s 20 there are 4 ways of assigning the chose in action: 1. May be assigned by an absolute assignment if notice is given by the assignee to the lessor in the context of the LD T relationship. A legal chose of action will be enforced if s 20(1) has been complied with. 2. Where there is a legal assignment of an equitable chose in action and s 20(1) has been complied with then the assignee may sue without the aid of the tenant. 3. where it is an equitable assignment of a legal chose in action and the assignment is absolute then the assignee may sue in their own name because the assignment of an equitable chose in action was enforceable in equity even with s 20(2) of the judicature act 4. where there is an equitable assignment of a legal chose of action that is not absolute then even in equity the assignee cannot sue in their own name and needs the aid of the tenant. An assignee may sue in their own name where s 20(1) as been complied with. Aronovitch v. Lyons Tours [1974] 1 W.W.R. 678 (Man. C.A.) SM:41 Facts:  Canpac (landlord) entered into a 5-year lease agreement beginning on July 1, 1966 with Transair (tenant). Under the terms of the lease, the lessee would not sub-let or assign without the lessor's consent. Lease also contained an option to renew, to be exercised within 6 months from end of term.  In May and June of 1970, Transair had discussions with the rental agent and building manager for Canpac about sub-letting the premises. The building manager had no objection to this arrangement because as far as it was concerned, Transair would still be the tenant.  On July 1, 1970, Lyons Tours began occupation of the premises as a sub-tenant. As a matter of law, the transfer was an assignment, not a sub-lease b/c Transair did not carve out a reversionary interest. Lyons paid rent to Transair (as if they had entered into a sub-lease).  Transair obtained consent to a sub-lease from Canpac.  Transair then purported to exercise its option to renew on Dec 29, or 30 of 1970. Canpac consented to the renewal in early 1971.  Aronovitch then became owner of the building.  In Nov./Dec. 1970, a letter agreement and lease agreement was sent by Transair to Lyons. But Lyons did not execute the documents until Jan. 1971 (the letter) and July 1971 (the lease agreement).  In Nov/Dec 1971, Aronovitch concluded on the basis of legal advice, that Lyons was a monthly tenants. In Feb 1972, he sent a one month notice to vacate to Lyons.  Lyons did not respond to the notice to vacate. Aronovitch made an application for a writ of possession. C----A | | T----L Appellant's Arguments  The transaction between Transair and Lyons was an assignment rather than a sub-lease.  Therefore, the next question is whether Transair was entitled to exercise the option to renew.  Because Transair had already disposed of all its interest, it had no status to exercise the option.  Consent was given by the lessor to a sub-lease rather than an assignment, therefore Aronovitch should not be bound by the consent of Canpac.  As a result, on June 30, 1971, Lyons was at best a monthly tenant [actually a tenancy-at-will that would be converted by operation of the common law to a monthly periodic tenancy].  HOWEVER, the Court did not accept the appellant's arguments because as a matter of law this was an assignment. Page 22 of 137

Issues: When does the tenant acquire a leasehold estate in the demise premises? (a) When the tenant enters into possession, (b) On the date specified in the lease, or (c) When the tenant executes the lease? More specifically, at what time exactly did Transair's original interest in the 5 year lease end by reason of the assignment to Lyons? Was it; - July 1, 1970 when Lyons took possession? - January 1971 when the letter agreement was executed? Or - July 1971 when Lyons executed the lease agreement? Holding: Although it is common for leases to specify dates, the purpose of the dates is only to calculate the length of the term. Lyons' legal leasehold estate only vested upon execution of the leasehold agreement because of the Statute of Frauds requirement that lease agreements be in writing. Therefore Transair still had the legal leasehold estate when they exercised the option to renew. At the same time, Lyons had an agreement to lease, an equitable leasehold interest in the demise premises. On July 1, 1970, the estate was split into two: 1) The legal leasehold estate between Canpac and Transair, and 2) The equitable leasehold estate between Canpac and Lyons. Therefore at that time until the documents were executed, privity relationships looked like this: Canpac Aronovitch P of K (5 yrs to expire on June 30/71 with right of option to renew – with written notice at 6 mo before expiry of the lease) Legal Transair Lyons P of K Equitable  Discussions re: sublease – June 70, agent of C had no problem  Entered into sublease with Lyons, possession on July 1/70, paid rents from there on)  Both letter agreement and lease agreement document – refers to sublease of 1 yr commencing on July 1/70. If true then it would expire at midnight on June 30/71. By granting a one yr term the Q is – did Transair reserve any part of the 5yr lease to itself. If so, then a sublease. If not reserving part of the original term then it’s an assignment.  On Dec 29 or 30 – Transair writes letter to C to request renewal of lease. In Sept 70 C assigns its interest to A.  A serves notice on L – argues is a mere monthly period tenancy – why? This wrong advice was given on the basis that L isn’t a one yr tenant because T could only create a fixed term tenancy in L if T itself had an interest which it could carve out of an interest in L. By giving an assignment T didn’t have the right to renew in Dec for an additional 5 yrs because they had given it away by virtue of the assignment. Therefore attempt to renew was of no effect and L’s tenancy was only by virtue of tenancy at will – entered into possession with consent of C and when the term expired they become an overholding tenant and b/c A accepted monthly rent payments, this was converted into a monthly tenancy which can be terminated with notice.  Did they still have an interest in the 4 yr term after the assignment ended? Doesn’t mean that they lost all of their interest in the original 5 yr term at that time. There is a distinction in the way in which the term can be calculated and the time at which there is the conveyance in a leasehold interest on a tenant. Term can commence before or after the tenant take possession. When they don’t stipulate when the term commences it will commence when they take possession or when the tenant pays rent for the first time. That is a presumption that applies where the parties don’t actually determine when the term commences. Based on the letter and lease agreement – the term was to be calculated as per July 1/70. T disposed entire interest when they conveyed a leasehold estate on Lyons, which could only take place in Jan 1971 when the letter agreement was signed. Since T still had an original interest in December and renewed in compliance therefore was valid giving it another 5 yr lease out of which it could carve an interest to Lyons.  Calculating the term and when a legal leasehold estate is created – once this distinction is recognized then the Man CA is correct. Reasoning: Even though there was an assignment there was no breach. Aronovitch argued that T could not have assigned passed Dec 31, as they had no interest past that when they assigned to Lyons. The court stated that it is true that T could not assign legal interest Page 23 of 137

past Dec. 31 but they still had equitable interests. (Ian: ALL Lyons had was an agreement to lease until T renewed.) The actual sublet was not executed until after the renewal which takes precedent over the actual time of possession. Ratio: A legal leasehold interest only vests in the tenant upon execution of the leasehold agreement, not when possession occurs. Note of Aronovitch v. Lyon Tours Argument based on the doctrine of past performance The Continuing Obligations of the Original Lessee Where T assigns her interest to T1, T is still primarily liable to L for breaches of the covenants contained in the original lease although in the event that L recovers from T, T will undoubtedly have the right to be indemnified by T1 and even by T1's assignee T2 in the event that T1 has assigned her interest. T's primary liability to L is based on privity of contract between L and T which endures for the full duration of the original term of the lease. ( Wamford Invt. v. Duckwoth , [1979] Ch. 127). In Alberta, there is some authority for the view that the lessee-assignor will only be liable if the parties have complied with the Guarantees Acknowledgment Act , R.S.A. 1980, c. G-12. This Act requires that the guarantor understood what he or she was doing. The authority for applying the Act in this situation is Alberta Financial v. Cuthbert (1984), 55 A.R. 147 (Q.B.) although this case is probably best confined to its particular facts which involved a tripartite agreement between the lessor, the lessee and the assignee. Assign or Sublet with Consent of the Landlord Consent to Assignment and Sub-leases  Where there is a covenant in the lease that requires consent of the landlord and that consent is not to be unreasonably withheld. Legal principles of reasonableness of withheld consent: 1) If the landlord acts unreasonably, the effect is to strike the clause to allow the tenant to assign or sub-let without consent. 2) Each case must turn on its own facts and circumstances, particularly each case must turn on the wording of the clause itself. At common law: a leasehold estate is freely assignable by any party with the consent of the other, unless the parties have made an agreement to the contrary just like the law doesn’t favour restraints on alienation, same goes for assignments or sub-lets unless there’s explicit agreement to those restraints. Unlike a freehold estate a freehold estate can never be subject to an absolute restriction on alienability. Such a total restriction on alienability is void. Not so with a leasehold estate – the parties may agree to an absolute restraint on assignments or subleases. If they so agree, this restriction will be upheld and won’t be void. Commercial tenancy – Consent cannot be unreasonably withheld. Residential tenancy – governed by s.21 RTA. S.21 is an additional tenant’s covenant that the tenant won’t assign or sublease without written conset of the LD. There is nothing that restricts or limits the LD’s ability to assign the LD’s reversion in the tenancy. The restrictions in the act are those only placed on the tenant. S.21 restricts the tenant’s common law rights to freely assign or sublet without consent of the LD. S. 21(2) says while 21 requires consent, (2) says the LD shall not refuse consent unless the LD has reasonable grounds to withhold consent. Where a LD decided to withhold consent the LD must provide reasons. Where a tenant requests the LD’s consent, and the LD does not reqpond to the request within 14 days, the LD is deemed to have consented to the assignment or sublease. Section 21(1) is a significant change to common law – the tenant now needs the consent of the LD. At common law (non-residential tenancy) the tenant would have to request the consent of the LD and the LD could agree or not and wouldn’t be required to give reasons. Sundance shows there is no common law obligation to give reasons even when consent isn’t to be reasonably withheld. A tenant could only find out the reasons by suing the landlord – and gain permission to sublet or assign without permission. The tenant is no longer required to obtain consent where the reasons given were unreasonable. A covenant in the lease can require a LD to give reasons. S.21(5) – a LD who refuses consent must give written reasons for refusal. As part of civil process, can obtain a discovery where the tenant can ask questions about the reasons for withholding consent. A LD who can withhold consent doesn’t have to give reasons or can give an unreasonable reason, he can later give a reasonable reason. It doesn’t matter that he gave an unreasonable reason in the first place. What’s reasonable vs. unreasonable? Houlder Brothers and Co. Ltd. v. Gibbs [1925] 1 Ch. 575 (C.A.) Facts: Houlder Brothers (plaintiffs) had lease for 21 years with Gibbs (defendant). Lease included the covenant that the lessee would not assign or sublet the property without the landlord's permission, but the consent was not to be withheld without a good reason (“such consent not to be withheld unreasonably in the case of a respectable person or corporation”). Houlder Brothers wanted to assign June, Page 24 of 137

1924 to Roneo for the residue of the term subject to consent, but Gibbs refused because it meant economic loss for him, b/c Roneo leased other prop from D and it was hard to rent out. Gibbs assumes that if lease is assigned to Roneo, then Roneo will drop the lease they already have in the building. 10M ............................ 12M G ............................ G | ............................ | | ............................ | HB ............................ R Issue: Was the refusal by the defendant to allow the assignment of the lease reasonable? No Holding: Court held the landlord's reasons for withholding consent were entirely personal to the landlord and extraneous to the LD tenant relationship. Generally, where the landlord withholds consent purely on the basis of economic reasons, such reasons will be unreasonable. Reasoning: Reasonable can be based on the character of the prospective tenant but is not proper to refuse consent based on relationships independent of the lease. Reasons must affect the subject matter of the contract. Barrow v. Isaacs: the words “imply that consent must be asked for before the assignment, and that it may be withheld, even though the intended lessees are proper persons, if such withholding is not arbitrary. To hold the lessor to something extraneous to the agreement would be unfair and would be giving too wide a reading of “unreasonably” Warrington L.J.: First question – “What is the inference to be drawn as to the intention of the parties in inserting in the lease a provision of this kind? Was used to protect the lessor against a lessee who although may be responsible and respectable, might well be reasonably objectionable in other ways and to protect the lessor from accepting a lessee whose use of the property may be objectionable. Ratio : To determine whether a landlord's reasons for withholding consent are reasonable must use a 2-pronged test. To be reasonable, the reasons must relate to; 1) the (responsible and respectable tenant) personality of the proposed assignee or sub-lessee, and/or 2) the use of the property by the proposed assignee. The specific language of the covenant is crucial in every case. There is no hard and fast rule as to what is reasonable and unreasonable. Previously decided cases can only provide guidance, not binding precedent because each case depends on its own facts and circumstances and the specific language of the consent covenant. In cases where the language is word for word identical, the result need not be the same because of the way in which the court determines if the LD was acting reasonably or unreasonably. How do we determine unreasonable vs. reasonable? The reason can’t be something purely personal to the landlord or extrinsic to the leasee and the proposed leasee. Gibbs – Roneo is a respectable and responsible tenant but his move will hurt us economically. This is purely personal and extrinsic to the tenant – therefore it is unreasonable. You must consider the nature of the premises and the user of the ppty. Must look at the nature of the premises – therefore can withhold consent based on the use of the proposed tenant. Concern about what te other tenants will think is relevant and the impact on such an assignment or sublease will have on another tenant. Holder vs. Sundance: are the tests the same? Holder uses a test more familiar to tenants and Sundance uses a test more familiar to contract lawyers. Both tests can be applied to the Sundance case and reach the same conclusion. When it’s a purely economic reason, the LD could only try to alter the covenant so that he is not restricted to the reasons provided in the covenant or common law. -the onus is on the T to show that the landlord is unreasonably withholding consent -the court took the traditional approach which was to inquire whether the reason given by the LD for withholding consent effects the T as a T and the LD as a LD? LD qua LD, T qua T. Where the LD is withholding consent the reason that the LD may be considered as acting reasonably is if the proposed new tenant is undesirable due to character or the use of the land. -in Houlder, there is nothing objectionable to Roneo, nor is there anything unreasonable about Roneos proposed use. Houlder Brothers v. Gibbs , 1925, C.A. In Alberta this case takes a back seat to Sundance : Ian thinks this case is better because it respects alienability. Sundance Investment Corp. v. Richfield (1983), 24 Alta. L.R. (2d) 1 (C.A.) Page 25 of 137

Contrast with Houlder Facts: Covenant in the lease that there was to be no sublet or assignment without permission from Richfield. Beaver Lumber, the neighbour and another tenant of Richfield, was against Sundance's proposed sublet to Swiss Chalet restaurant because of parking problems. Covenant included that landlord could refuse if another T isn't happy (if in relation to the nature of the business). Therefore, Richfield refused. Lease indicated "nature of operation" was a valid refusal. R .............. R | .............. | B .............. S wishes to sublease part of premises to SC .............. | .............. SC Issue : Has the lessor unreasonably withheld its consent to a proposed sublease by its lessee? NO Reasoning: There is no legal obligation on the landlord to give reasons for withholding consent. If the landlord gives no reasons, the onus of proof is on the tenant to show that the withholding of consent is unreasonable.  The landlord may state reasons for the withholding of consent at any time. If it is found to be unreasonable, the L may provide additional reasons. If the additional reasons are reasonable, then the non-consent will still be found as reasonable.  Provided that one of the reasons is reasonable, that will be sufficient to make the withholding of consent reasonable (even if none of the other reasons are reasonable).  In this case, parking was seen as so important that the Court had to recognise the importance of the landlord-tenant relationship as a business relationship (contract principles).  In a shopping Mall, parking goes to the nature of the business relationship.  Test of reasonableness: would a reasonable landlord consent to a sublease that would lead to a direct loss in 80,000 loss of annual rental income. Dissent (Harradence JA)  Nature only refers to the type of business...not something every business has (i.e. parking). Parking does not go to the nature of the business.  Covenant is being interpreted too broadly; if meant to include parking, should have said that.  By allowing consent to be withheld, isn't the court allowing the landlord to re-write the lease (Giving Beaver Lumber some kind of protected interest in the parking stalls in front of the store that it wasn't given in the lease.)  Landlord was prepared to assume the risk of expansion of Sundance’s business and was bound by that assumption of risk. Ratio: Burden of proof is on the tenant to show unreasonableness. Economic concern is legitimate to withhold consent. Consent may be reasonably withheld when the economic interests of the landlord would be prejudiced if he gave consent. Reasons must relate to the user of the demises premises or have some connection to the actual ppty that is the subject of the contract . The real question is w/o/n the parking is part and parcel of the demise. This is the distinction between the majority and dissent. Majority says that (especially with shopping Malls – major destinations) where parking is v. important the LD can take into consideration the impact that the use would have on parking. And as such, such a reason has a connection to the actual ppty in question. Harradence says – look at the actual wording of the covenant and parking isn’t part of the demise of the premises. Harradence would say that parking isn’t part of the demised premises and any reason in relation to parking is purely personal to the LD and extrinsic to the tenant. It has no bearing on the ppty itself because the ppty is the building and not the parking lot. Further it has no relation to the exclusive possession of the retail shop. CLASS : Note the marked contrast in H&B and Sundance, it would appear that this is a move towards increasing alienability. Can use HB and Dissent in Sundance, Nigel likes this. The Running of Covenants and the Concept of Privity Basic Rights and Obligations - The basic rights and obligations of landlords and tenants are those agreed upon between the parties in the lease. - Parties may agree to alter or waive common law rights in the case of non-residential tenancies Basic obligations of a landlord at common law : - There are 3 covenants which are implied when the lease is silent with respect to these obligations in both residential and non-residential tenancies; 1. Covenant for quiet enjoyment. Page 26 of 137

2. Covenant for non-derogation of grant. 3. Covenant that premises are fit for habitation at commencement of the term. Basic obligations of a tenant at common law; 1. Rent 2. Waste - not to commit waste or permit waste to occur. - These are the only common law implied covenants of a tenant towards a landlord. - Tenants' obligations with respect to residential premises have been significantly expanded by the Residential Tenancies Act . 1. Privity of Contract - pg. 58 - Occurs whenever the parties stand in direct contractual relationship with each other. - If there is privity of contract between the parties then all covenants and promises in the Kn are enforceable by and against those parties. - In the example: L & T have privity of contract, even when T enters sub-lease. - The original parties to the Kn will continue to be bound even if the T assigns their interest 2. Privity of Estate but not Privity of Contract - pg. 58 - Exists when the parties each have an interest in the same leasehold demise - Exists whenever there is a tenurial relationship between the parties, whenever the parties share in the same estate. - Whenever there is privity of estate between the parties, only those covenants that touch and concern the land ("real" covenants) are enforceable by and against the parties that stand in a privity of estate relationship. - Covenants that do not touch and concern the land are not enforceable. - TEST for whether a covenant touches and concerns the land : - ALL promises which touch and concern the nature of the demise or are real covenants relating to the tenancy will bind in both burden and benefit all parties privy to the estate. - Whether it affects the landlord qua landlord or tenant qua tenant. That is, how essential is the covenant to the landlord- tenant relationship? - Is it intimately connected to the landlord-tenant relationship or is it merely personal or collateral to the landlord or tenant? - From Smith v. River Douglas p.58 - To qualify as a covenant that touches and concerns the land, it must either affect the land with respect to the mode of occupation or it must be as such per se, and not merely from collateral circumstances, affect the value of the land. - However, previous decisions with regards to such covenants can only provide guidelines. Each case must turn on its own facts (must consider the specific provisions of the lease). - In the context of the LD T relationship, it must be shown that the covenant touches and concerns not just the land “but the subject matter of the lease” - The tests can be difficult to apply, each parcel of land is considered unique. No privity of contract or privity of estate - pg. 59 As a general rule, where there is no privity of contract or privity of estate those covenants which do not touch and concern the subject matter of the demise will not bind the parties. There are 2 exceptions: Exception #1: There is a general rule that the benefit of a contract is assignable. The current authority for this proposition is found is s. 20(1) of the Judicature Act which requires that the assignment be absolute , in writing and that express notice be given to the person from whom the assignor would have been entitled to claim. Exception #2: Although the burden of a promise was never assignable as a matter of law, equity took the view that the burden of restrictive covenants would bind the person who purchased an estate with notice of the burden. The law also requires a "dominant and servient tenement" ( Tulk v. Moxhay ). So if A and B, two owners in estate in fee simple enter into an agreement which provides that B shall not build on the land, A will be able to enforce that promise against B b/c of privity of K but also against C if C purchases from B with knowledge of the promise. A conditional grant may be an exception to the rule that positive covenants do not run in law. In the instrument creating the benefit, if a grant of the benefit is framed as being conditional upon the continuing performance of a positive obligation, the positive obligation may well be enforceable, not because it would run with the land, but because the condition would serve to limit the scope of the grant itself. Amberwood Investments v. Durham Codominium Corporation , the Ontario Court of Appeal accepted the conditional grant exception in principle but not on the facts before the court. Page 27 of 137

A true restrictive covenant TEST: 1. must be a negative burden (a promise not to perform or do some act), If it is negative burden, then go on to next three: 2. must touch and concern the land, 3. must be an intention that the covenant run with the land, and 4. must be a dominant and servient tenement. - Dominant tenement  parcel of land that will enjoy benefit from the covenant. - Servient tenement  parcel of land that will be burdened by the covenant. - Restrictive covenants are usually found in freehold lands rather than leasehold. Exception: do not need a dominant tenement if it is part of a building scheme (such as a housing development). Equity's giant: The bona fide purchaser for value without notice. If a party did not have notice (and there was no privity of estate or contract) then the covenant will not be enforceable. (see p. 358 of Ziff) Once you agree to a restrictive covenant, it is very difficult to have that covenant removed. Class: The common law states that where a tenant seeks to assign or sublet and the landlord unreasonably withholds that consent, then the the tenant does not have to seek the consent and may freely assign or sublet without consent. The issue that arises is what is unreasonable consent -there are two approaches to determining reasonableness and unreasonableness -Houlder Bros is representative of the traditional common law approach and reflects a greater emphasis on the proprietary aspect of the LD T relationship. -in Sundance the ABCA took a more contractual approach rather than a property approach -Contractual precedence is of little value because all Kn are different -a benefit of the common law approach is that it is consistent and principled. It can be applied to future cases. -the fundamental principle in interpreting a Kn is to look at the intentions of the parties and determine what was in the reasonable contemplation of the parties when they entered into the Kn. This was not applied in this case. If it was would it have been within the reasonable contemplation of R and S when they entered into their covenant that R could use it to impose parking restraints on S? -In a covenant there is a benefit and a detriment. The T has the detriment to do something, the LD has the benefit. - Carruthers v. Tioga Holdings, Ltd ., 1997, A.J., pg. 77 (basic principles case) Facts: C had land in Brick Creek area. He wanted to sell that land to a purchaser but wanted to take an option that would allow c to buy a piece of land to use for entertainment purposes when the purchaser would subdivide. His option was to purchase conveyance in the event that the land was ever subdivided. Purchaser promised to assist c in getting subdivision => c would benefit of subdivision sale to third party took place => property was mortgaged and purchased from the mortgage by Tioga Holdings, who wanted to subdivide but didn't want the option of c. C protected the option by a caveat. Option to purchase expired in 1999 => T decided to hold off 1. C sought a declaration that T was bound by option C sought that 2. the covenant of assistance to purchase run with the land and T would therefore have to execute the option to purchase before expiring. Issue: Did the covenant or assistance to purchase run with the land? NO (not a negative covenant) Reasoning: basic principles of LD/T and freehold conveyancy law 1. assign or sublease => assignment 2. PK => all covenants are binding PE => if touch and concern 3. NOPE/ NO PK--true restrictive covenant (mostly in freehold conveyancing) but if LD/T agree to enter into true restrictive covenant-that can be enforced => Characterize as a true restrictive covenant => criteria 1. language of covenant must indicate clear intention that the covenant be binding on their assignees 2. dominant tenement + serviant tenement (two parcels of land, one benefited/one burdened) 3. obligation of the covenant must be a negative obligation *here 1. the obligation was positive (asked to do something) and 2. there weren't 2 parcels of land Holding: Not a true restrictive covenant so C loses, T can wait till option expires Note: What remedies does c have? => can sue the original party to the contract (PK) Page 28 of 137

=> party had to specifically perform the original but it can't be made where compliance is impossible as in this case => therefore the only remedy is damages. RUNNING COVENANTS B/W LANDLORD TENANT & BEYOND:  Applies to both landlord and non land landlord relationship  In the Landlord Tenant relationship there is not only Privity of K there is also Privity of Estate too  Covenants themselves are promises made by deed under seal (that was the old school mentality) now any promise executed in writing that satisfies the statute of frauds will be thought of as a covenant o Real Covenants  Are covenants that are closely connected to the subject matter of the demised premise, or closely connected to the landlord tenant relationship o Personal Covenants  Only enforceable where there is P of K  Covenants that are not closely connected to the landlord tenant relationship, nor effects the subject matter of the demise  i.e. where the landlord demises to the tenant and the tenant promises to buy supplies from another parent company of the landlord.  Real Covenants are covenants that touch and concern the land o It is sometimes hard to identify these types covenants  The language is important  Some cases say that a covenant will touch and concern if it effects the mode of occupation of the land  Courts have also said that if the covenant effects the value of the land it can be regarded as touching and concerning the land  Ian says these are hard to apply, and what the courts are looking at those kind of covenants that will effect the value of tenancy in a significant way o i.e. Availability of parking (Sundance Case) Hall v. Ewin, C.A. (1887), SM: 63 Hall  80yr lease  covenant not to use property for noisome or offensive trade  Tarlington   residue less 3 days**  Ruddach  Ewin   21yr lease (covenant included)  McNeff - opens a circus on the property which Hall claims violates covenant against noisome or offensive use of the property P o Contract (can sue) P o Estate Neither Hall – Tarlington Tarlington – Ruddach Ruddach - Ewin Ewin - McNeff Hall – Tarlington Tarlington – Ewin Ewin - McNeff H+M H+R H+E T+M R+M ** If T had given R the whole residue of the property the diagram would look like: Tarlington  Ruddach  This would not happen in Alberta b/c in Alberta mortgages operate as a charge against the land and not a conveyance  Hall says that He has a covenant with T that T will not make use of the property in a noisome way, and when E demised the land to McNeff the same covenant Page 29 of 137

P o Contract (can sue) P o Estate Hall – Tarlington Tarlington – Ruddach Ruddach – Ewin Ewin – McNeff Hall – Tarlington Tarlington – Ewin Ewin – McNeff  No privity of contract b/w H and M, BUT this is a landlord tenant relationship so the P of E kicks in. o R has no interest left (he assigned his interest to E) in the land so that is why he is not involved in the P of E relationships.  No privity of estate b/w H and M  Then we must look at the covenant and identify if it is a true restrictive covenant so as to run with the land (does it meet the 4 prong test) 1. Is it negative 2. Was it intended to bind further parties other then the tenant in the head lease 3. Does it touch and concern? 4. Are there dominant and servient tenements?  Dominant is the benefit  Servient is the tenement that is hindered  The only way we can satisfy this requirement is to say that the H and T head lease meets the dominant requirement (that there is no noise) and the Servient becomes the E and M lease b/c hall is not allowed to make noise. Decision: McNeff was evicted Comments: This case illustrates an example of privity of contract and privity of estate. This case is simply a question of in the absence of P of K and P of E is this a true restrictive covenant such that it will be enforced in equity against Ewin? This case is a good example of a LT situation that good give rise to a true restrictive covenant. Where are the dominant/subservient tenements? This is just one house – do we have one estate or two? We have two estates – one that is 80 years (dominant) and one that is 80 years less 3 days (subservient). Even in the LT situation where there is only one parcel of land there can be two estates (two leasehold estates).  With privity of contract, Hall could have sued Tarlington for breach of covenant. In that case the head lease would be terminated and with that, all of the sub-leases would also have been terminated.  Instead Hall sues Ewin. (Why? maybe Ewin had more $)  Since there was no privity of estate or privity of contract between Hall and Ewin (or McNeff), only true restrictive covenants were enforceable. Smith V River Catchment board: The covenant will touch and concern if it effects the mode and occupation of the land or per say the value of the land plus touch and concern the demised land. It may affect the mode of occupation and the value of the land The covenant to not carry on a nosy pursuit is a negative covenant. It effects the way that Ewan could occupy the land. It touches and concerns the land because it has regard to the occupation of the land. It was intended to bind anyone wh it was assigned or subleased. H is the dominant tenement, E is the servient tenement. Spencer’s Case, SM: 64 Facts: Spencer and his wife joined together to grant a demise to S. In the demise to S, S covenants to build a brick wall on the property. S assigns to J. J assigns to C. Spencer and his wife brought an action against C to try and force him to build the brick wall (A privity of K is needed to enforce this.) Spencer(S)    Tenant (T)  J  Defendant (C) Page 30 of 137

P o K P o E S – T T – J J – C S – T, destroyed by assignment to J S – J, destroyed by assignment to C S – C Issue: Where there is no privity of K but there is privity of E, what covenants if any are enforceable by the landlord. Is the covenant that the original tenant build a brick wall upon part of the land a covenant that "touches and concerns" the land? No. Ratio : Where there is only privity of estate, only covenants that touch and concern the land are enforceable.  If the thing to be done does not touch and concern the land, then the assignee is not burdened.  The fundamental important piece in this case in paragraph II: here the law distinguishes b/w things that touch and concern and those that do not - A thing is merely collateral if it does not touch and concern the demise – does not effect the subject matter of the demise it is considered collateral - If it does touch and concern the thing demised it does run w/ the land and is enforceable at LAW - Where there is privity of estate then if the covenant is one that touches and concerns then it is enforceable at law even if there is not P of K at LAW  Where there is a landlord tenant relationship the only thing that is looked at is whether the covenant touches and concerns and there is NO DISTINCTION b/w positive and negative covenants.  When you lease personal property, it is a purely contractual relationship and there will be no privity of estate because no estate relationship is created.  Where there is a covenant to repair in a lease for a term of years, this is a covenant that touches and concerns the land. Those who take the benefit of the covenant should also take the burden. It will be the tenant who takes the benefit of keeping the premises in good repair, therefore the tenant should bear the burden.  [But what about a monthly tenancy where because of the short notice required to terminate, wouldn't it be the landlord who would get the benefit of the covenant to repair?]  ALL of these principles apply equally to the original assignee as well as any subsequent assignees.  Where there is privity of estate both the burden and benefits of covenants that touch and concern the land will run the land, in this case it was found that building a brick wall did not touch and concern the land. Reasons:  Was the covenant something that related to something in existence at the time when Spencer and his wife entered into the lease with T? NO. Where the covenant relates to something that is in existence at the time the original lease is entered into that covenant can be enforced against assignees of the original LD or T’s interest.  Section 65 of the Law of Property Act says two things: whether or not a covenant is enforceable depends simply on whether or not the covenant is a real covenant. The grantee of reversions act of 1540 is not part of the law of Alberta. S. 65 combines to do two things:  The law is the same for the LD as the T and vice versa. Is there privity of E between the parties and if so, is it a real covenant?  A real covenant is any covenant that touches and concerns the land; that is the subject matter of the demise. It does not matter in the landlord tenant context if the covenant imposes a positive or negative obligation. Where there is privity of estate it does not matter whether the covenant imposes a positive or negative duty; it only matters whether the covenant touches and concerns the land. Law v. Equity:  Every promise has a benefit and a burden  Whereas the benefit of a covenant can be assigned at law, the burden of a covenant can never be assigned at law. o This is depicted in the Judicature Act  Spencer’s case opens the door to assigning the burden on a party when there is not a privity of K. If the covenant touches and concerns AND THERE IS PRIVITY OF ESTATE.  In Equity…. o The burden can be placed on the party IF IT IS A TRUE RESTRICTIVE COVENANT. Equity is not concerned with privity of estate, and privity of contract. Note: This case is the authority for "the touching and concerning" proposition but Canadian law no longer observes the difference between things in being and things that ought to be done. The only relevant question is: are these covenants real covenants relating to the tenancy (LPA s.59.2) There is privity of estate between S and C. Page 31 of 137

-the real covenant was a promise to build a brick wall on the subject of the demise. -each paragraph has a gem in it: 1. whatever the covenant requires be it positive or negative, it must relate to the subject matter of the demise. If the thing is in being at the time of the grant then it can attach and relate to the subject matter of the demise. If it does not exist at the time of agreement then it cannot relate. The inexistent aspect is no longer Canadian law. What matters now is does the promise to do something relate to the land or premises that are subject to the demise. S 65 of LPA requires that it be a real covenant 2. touch and concern test in order for a positive obligation to run with the land where there is privity of estate. If you make a positive obligation, in order for that positive obligation to be enforceable where there is privity of estate it must be in relation to the subject mater of the demise and not a promise in relation to another property. 3. draws a distinction between a promise that is a duel promise. A promise that touches and concerns and one that does not touch and concern. 6. a covenant to repair touches and concerns the land it is enforceable by virtue of privity of estate. 7. if the LD can enforce a positive obligation, so too can an assignee. Dewar v. Goodman(1909) (H.L) SM: 72 Facts  1820 – 89 year lease (repair and right of re-entry)  Does the lease provide a right of re-entry upon breach of a specific covenant? Usually a right to damages, and not right of re-entry and termination of the tenancy.  1886 Barnes granted an underlease to Humphreys (less than the full term therefore a “lease” and not an “assignment”  Land in the sublease – was for 2 of the 211 houses erected on the land.  L  Chelsea Co.   Cov H : 2 covenants (of the 1820 89 yr lease): 211 Houses built  1) To keep premises in good repair all buildings on land.  2) right of re-entry reserved by L in event T breaches 1st covenant.  T  B  G  Cov S : 3 covenants  1) For quiet enjoyment  2) To honour covenants of head-lease (see 2 covenants listed above)  3) To indemnify the under-lessee and his assigns against breaches of those covenants  [Sub-lease is for 2 out of 211 buildings under original head-lease]  H  D - G doesn't keep the original covenants. He fails to keep the 209 houses under his charge in good repair as well as the 2 under him. - In order for a head landlord to terminate a sublease there must be a right of re-entry. - C brings an action against G to exercise its right of re-entry and terminates the head-lease. - Upon termination of the head-lease, all sub-leases dependent on that head-lease are subsequently terminated. - Therefore, D's assignment is terminated. - D then brings an action against G. - Since there is only privity of estate between D and G, the question is whether the 3 covenants are covenants that touch and concern the land of D & G? Answer is NO. - Subject matter between L & T is the 211 buildings - Subject matter between B & H is 2 buildings. - Indemnify: (def’n) To secure against loss or damage that may occur in the future. To provide compensation for loss or damage already suffered. - Chain of Indemnity: Based purely in contract that is designed to protect assignees that may not stand in a privity of contract or estate. But can sue in contract in indemnity. Privity of Contract Relationships  L & T  L & C  T & B  B & G  B & H Page 32 of 137

 H & D  Both parties can sue and be sued – there is privity of contract between these parties Privity of Estate  G (reversion) & D (1886)  C (reversion) & G (1920)  How many leasehold estates have been created? Two  There must only be one privity of estate for each leasehold estate created  Who will have the reversion at the end of the leasehold estate? o 1820 – G has the last second of the term, C will have the reversion o 1886 – D has the last second of the term, G will have the reversion Issue : Do the 3 covenants – between D and G – in the sub-lease constitute covenants that touch and concern the land? NO, they are not enforceable by D against G unless they were true restrictive covenants . These covenants were collateral only – it was an entirely different piece of land (2 houses vs. 211 houses) – the covenants don’t run with the land. Reasoning: 1. The covenant for quiet enjoyment was not breached by G. D's quiet enjoyment was interfered with by C's termination of the head-lease. C is a superior landlord and Usually the covenant for quiet enjoyment is not binding upon a superior landlord. 2. The covenant to honour the head-lease does not touch and concern the land of the plaintiff's demise because it relates to an entirely different estate. 3. Similarly, the covenant to indemnify did not touch and concern the land because it related to a different estate. 4. Notes: - It was only necessary for one covenant to touch or concern the land. - D could have broadened the lease to protect him by broadening the covenant to quiet enjoyment to include superior landlords - see pg. 95. - This case should not be held to have determined that a covenant to repair doesn't touch and concern the land. It is just that in this case, different land and different buildings are at issue - not the ones that are considered in the original agreement. Head lease was irrelevant to the relationship between D and G (sub-demise). If you promise to do something as a landlord, on property other than that which has been demised, the promise is not binding. Comments:  When there is privity of estate the covenants that are enforceable – all of those covenants that touch or concerns the land are enforceable by (D) and against (G) those parties who have privity of estate.  The covenant that B would follow the covenants of the head lease didn’t relate to the land. They referred to a different leasehold estate.  The “ingenious argument” – by allowing the head lease to be terminated amounted to an interference with the peaceable enjoyment with the sublease (D). Court didn’t extend the covenant of quiet enjoyment.  Any sublease dependant upon a head lease, if the head lease is validly terminated then the sublease (dependant on the head lease) is also terminated by operation of law.  A sublease can always apply to the court in the event of a termination of a head lease to ask the court to relieve against the termination of the lease.  Novation: terminates the original contract therefore can’t sue that landlord The covenat between C and G is for 211 houses. The subject of the demise between G and D is for two houses. It is totaly differ relstionships. Where a head lease is validly terminated by the head lessor the subleases are automatically terminated. As a result D sued G for failing to keep the houses in good repair. -court had no problem with that on the basis that the original covenant to repair runs with the land, but; -the court cited the second principle of Spencers case. -the covenant to keep the houses in good repair was a covenant -the covenant must touch and concern the subject matter of the demise among the parties who gain benefit and suffer detriment. In this case it is not part of the subject matter of the demise. -the court held that D could not enforce the repair covenant against G -the covenant for quiet enjoyment did not extend to these circumstances. There has to be a direct physical interference by the LD with the peaceable use and enjoyment of the premises by the T. Page 33 of 137

-D then tried to argue thatthe indemnification covenant was a real covenat that D could enforce against G -held that an indemnification covenant is a mere personal promise by the parties to the lease as a personal collateral promise it does not run with te land. -D was out of luck on all arguments. For D to prevail he would have had to argue for something that ran with the land. Note 2 page 66: covenant for quiet enjoyment. If the covenant in D and G were worded this way would the result have been different? Merger Restaurants (Shakey's Restaurant) v. Lakeview Development of Canada Ltd., 75888 Manitoba Ltd., and D.M.E. Foods Ltd. (Bonanza Restaurant ), 1995, Man. C.A., SM: 75 B----------Lakeview ( Lot 2) B --------- Lakeview (Lot 5) T---------Merger Bonanza Facts: 2 lots next to each other. 1 company on one of the lots expanded its building and thus available parking was reduced. 2 nd company on other lot was upset because their parking was being taken over by customers of the other company. 2 nd company suing (only has privity of estate). Issues: 1. Do the provisions in Merger's lease restrict the use of the parking areas in Lot 2 to Merger? yes 2. Is L entitled to unilaterally alter the common area including parking space? no 3. Does the provision in the Merger lease, which grants common area rights to Merger, qualify as a covenant that running with the land and therefore binding upon Lakeview? yes 4. w/o/n the covenant with respect to the common areas was a covenant that ran with the land so that it would be binding on Lakeview. Yes, binding on L. Reasoning: Lease as a contract - In interpreting the lease the Court applied the same principles as would be used to construe any contract. That is, what was within the reasonable contemplation of the parties at the time that the contract was entered into? - The Court will imply a term into a lease only under the same conditions under which it would imply terms into any other contract. - Uses reasonableness arguments Ratio: Parking and a covenant with respect to parking is a covenant that "touches and concerns" the land so that it would run with the land and be binding upon those in a privity of estate relationship. (Spencer’s case lives.) A promise that relates to the property that is not the subject matter of the demise may run depending on the circumstances.  “Covenant that runs with the land” – if the covenant affects either o (1) the land itself in the sense that if affects the nature, quality or value of thing demised . This is a recognition of the interest of the tenant. o (2) the value of the land at the end of the term . Recognizes the interest of the landlord given the nature of the parking would affect the value of the land in reversion. Importance of Common Areas and Parking - This case reinforces the decision in Sundance . Therefore, interference with parking could result in a breach of a covenant of the lease dealing with parking. Parking and availability of parking affects the value of the land, therefore it "touches and concerns" the land. Notes: - The traditional test for a covenant to run with the land is that it must “ touch or concern” the subject matter of the lease ( Spencer’s Case ). - Interesting because shows analytical approach needed to see if bindee could enforce terms. First need to construe covenant and see on its language whether dispute between parties falls under the covenant. - Covenants designed to protect value of land for duration of term are likely to be covenants which “t & c” and will be enforceable under privity of estate. Page 34 of 137

- In Merger , court held that parking affects the nature and value of shopping lands but may not affect other properties in the same way. DO not think ALL covenants with respect to parking ‘touch and concern’ the land. Look at particular circumstances. - this case expands Dewar b/c it allows the LD to concern himself with something other than the original demise but doesn't go against it.  Common areas defined in the lease included parking spaces on lot 2. Therefore there is no question that the lease included the common areas and that the subject matter of the demise included parking on lot 2. A covenant runs with the land if it touches and concerns the land or it is a real covenant under s.5 of the Act.  The court pointed out that it would be absurd for a restaurant in a shopping mall to not protect their interests in parking.  In interpreting the proviso the business efficacy must be taken into account.  Court looked at the importance of parking given the nature of the business.  Courts asked whether it affected the nature and quality of the thing demised and the value of the land at the end of the term. I. Basic Rights and Obligations of the Landlord SM: 80 Approach to basic obligations of landlords and tenants 1. Residential or non-residential tenancy? - In a residential tenancy, must first look to the Residential Tenancies Act. 2. The lessor's position (in a non-residential tenancy); - Lease or no lease? (i) If there is a lease, the lease prevails (even if the implied common law covenants are changed or excluded) - The first step in interpreting the express covenants in the lease is to ask "What is the scope of the covenant?" and "What is its substantive content?" - If the implied common law covenants are not dealt with, the role of the common law is to fill in the gaps in the lease. - BUT where an express covenant deals with part of the common law implied covenants, the Court will Usually find that the intention of the parties was to exclude all of the other common law covenants. (ii) If there is no lease, the 3 implied common law covenants will be applied (QE, Non-derogation of grant, habitability) 3. Residential tenancies and the lessor; - Section 14 covenants ( Residential Tenancies Act ), apply to every residential tenancy and contrary lease provisions prejudicing the tenant's rights are void (ss. 2.1) (a) that the premises will be available for occupation by the tenant at the beginning of the tenancy; (b) that, subject to section 17, neither the landlord nor a person having claim to the premises under the landlord will in any significant manner disturb the tenant's possession or peaceful enjoyment of the premises; (c) that the premises will be habitable by the tenant at the beginning of the tenancy. - The only implied covenant for the tenant is for them to pay rent. - s. 14(a) & (b) are saying the same thing as the covenant for quiet enjoyment. - s. 14(b) limits the scope to the landlord and those claiming by, through and under the landlord. - Therefore, sections (a) and (b) seem to be just a codification of the implied common law covenants except that the landlord and tenant cannot exclude them. - s. 14 (c) habitable = capable of living in at the beginning of the term (not necessarily in perfect repair) - s.14 covenants cannot be waived, s.16 covenants can. - Because common law implies covenants when parties fail to do so themselves, the court will look at them closely and will only (generally) intervene when there has been a physical breach (easier for court to ascertain). 1. Section 17 of RTA - Entry by landlord. Obligations a landlord owes to a tenant:  S.15(a) and (b) – combine to create a covenant for quiet enjoyment  S.15(c) – fit for tenancy, makes no reference to the requirement that the premises be furnished or that it must be of a short term duration.  S.5 – notice requirements – ability of a LD to terminate a periodic tenancy  S.14 – to increase the rent, the LD must give notice of intent to increase rent  S.5 & 14 – influenced by residential tenancy regulations – be aware of them  S 16 covenants o A. Possession o B. Subj to s 23, quiet enjoyment Page 35 of 137

o C. That the premises will be fit for habitation as a minimum required by the public health act and the regulations.  S.17 – requires a LD to provide a copy of a residential tenancy agreement in writing to the tenant  S.18 & 48 – requirements of an inspection report and a LD entitlement to make deductions from a security deposit provided by a tenant  S.22 – requirement to be met by a LD to enter premises to inspect the premises  S.23 – provisions to be met my a LD who wished to add onto the existing locks or change the existing locks A LD’s obligations at common law:  Basic obligations were the 3 implied covenants 1. For quite enjoyment -Two branches: 1. peaceable possession at the start of the term 2. not to significantly interfere with the T peaceable possession during the term -These branches apply to the LD and anyone else acting by through or under the LD. This expressly applies to a superior LD. -It requires a significant interference of the peaceable possession. A significant interference by the LD has nothing to do with noise, it is an interference with the possession. For noise to qualify it would have to be a noise of such intensity that is interfered with the T possession. Quiet does not really refer to noise. -A calculated course of harassment can amount to interference even where it does not physically interfere with the possession. -A T is only entitled to quiet enjoyment when they are not in breach of any terms, provisos or covenants in the agreement. 2. Non-Derogation from grant -This is also an implied covenant. If there is an expressed covenant, then there is no room for the implied covenant. -where there is an agreement and the T is to put the land to a particular use, if the LD is aware of the use of the land there must be knowledge of that particular use by the T in the LD, then the implied covenant of non-derogation of grant stipulates that the LD may not use land retained by the LD that would negate or interfere with the use to which the T intends to use the subject matter of the demise. The LD cannot permit the use of land used by the LD that would negate the particular use that the T puts the land. 3. Premises be fit for habitation at the beginning of the term -this only applies to furnished premises. -it must be a demise of short duration. -the covenant that it would be fit for habitation only applies at the commencement of the term. The basic right of the T is whatever the substantive obligation is on the LD All three common law covenants are implied. Any implied covenant, if the LD and T expressly agree on a covenant that deals with the same substantive content of the implied covenant, then there is no implied covenant, and the expressed covenant does no apply. A tenant’s obligations under the RTA:  S. 20 –  S.5 – notice obligations of a tenant  S.21 – prohibits a tenant from assigning or subleasing without written consent  S.23 – locks, a tenant cannot change the locks, a tenant may add additional security devices that can be operated only by someone inside  S.18 – tenant’s obligations to sign an inspection report prepared by both LD and tenant, a LD can unilaterally sign a report when a tenant refuses A tenant has an implied obligation at common law:  To pay the rent when the rent is due – rent is sacrosanct! The only way in which additional obligations can be imposed on a landlord or tenant is thru the lease agreement. For this reason the lease agreement is the primary source of the basic rights and obligations of the LD and the tenant. Under the RTA the T may not waive rights as they are the weaker party. The LD may waive rights. COVENANT FOR QUIET ENJOYMENT Page 36 of 137

London Borough of Southwark v. Mills (SM 71) (apartment building sued by tenants for poor sound insulation – can hear everything in other apts) [1999 Engl HL] Facts: Old apartment building w/ really poor sound insulation. Can hear everything from other apartments. Tenants suing landlord under tenancy agreement for breach of quiet enjoyment and also common nuisance. Issues: Did the LL breach the quiet enjoyment covenant in tenancy agreement (i.e. what is the scope of the QE covenant?)? Or guilty of common nuisance? No to both Reasoning: Lord Hoffmann: - Covenant of quiet enjoyment does not mean undisturbed by noise- means uninterrupted possession (authority for this on SM 93 is Jenkins v. Jackson [1888] ) - For quiet enjoyment to be breached there must be - Substantial interference w/ tenant’s possession (i.e. his ability to use it in an ordinary lawful way)  this did not occur - “To constitute a breach there must be some physical interference w/ the enjoyment of the demised premises, and that a mere interference with the comfort of persons….from noise…is not enough” ( Browne v. Flower [1911] on SM 93) - “at least doubtful” whether a nuisance by noise was a breach of the covenant ( Phelps v. City of London Corp. [916] ) - Another problem w/ quiet enjoyment covenant is that it is prospective in nature - It is a covenant that the tenant’s lawful possession will not be interfered w/ by the landlord or anyone claiming under him - The covenant does not apply to things done before the grant of the tenancy, even though they may have continuing consequences for the tenant - The tenant takes the property as he finds it, unless there is a statutory protection, etc to help him in this situation - As for private nuisance  nuisance involves doing something on adjoining or nearby land which constitutes an unreasonable interference w/ the utility of the Pl’s land (SM 96) - The nuisance in this case is from the neighbours’ flats – but the Pls here are alleging it to be coming from the landlord – this is not the case and the landlord cannot be liable for the neighbours committing a nuisance, if they are doing so - Dismiss both appeals Lord Millett: - “one who takes a floor in a house must be held to take the premises as they are, and cannot complain that the house was not constructed differently” ( Carstairs v. Taylor [1871] on SM 98) - This is freedom of contract and autonomy to contracting parties - In absence of statutory or contractual obligation, tenants cannot compel landlord to install sound insulation - Quiet enjoyment is not noise-related, it is uninterrupted possession - But there need not be a “direct and physical” interference w/ the enjoyment of the land – no wording in the covenant on this - The implied obligation and quiet enjoyment covenant have 2 features in common: - Prospective in nature - Grantor’s obligations are confined to the subject matter of the grant - In present case covenants guaranteed the “tenant’s right to remain in and to enjoy the quiet occupation of the dwelling house” - No mention of anything outside of the apartment itself - Have to take undesirable feature of flat as it comes (noise from other flats) - “In construing the covenant, the location of the demised premises and the use to which adjoining premises are put at the date of the tenancy agreement, or the use to which they may then reasonably be expected to be put in the future, must always be a material consideration” (SM 101) - Need for legislature to step in to deal w/ poor living conditions like this situation but court is limited to relevant tenancy agreements, current legislation or common law to find a remedy Ratio: The buyer/lessee has the onus of finding defects Class Notes: There are 2 kinds of defects that need to be considered: 1. Patent: any physical defect in the condition of the property that could be discovered by any reasonable person making a reasonable inspection of the premises. There are no exceptions to caveat lessee for patent defects. There is no remedy or relief because the common law is strict. Page 37 of 137

-There is a duty on the lessee to exercise due diligence to investigate what the potential defects may be. -This also includes a duty to perform a due diligence analysis of the legal fitness of the property. -This also includes a duty to perform a due diligence analysis of regulatory defects in the condition of the property -there is no duty to disclose, and no liability for a patent defect. 2. Latent: any physical defect that could not be discovered by a reasonable person making a reasonable inspection. There is no obligation on the lessor to disclose to a potential tenant any latent defects of which they are aware. Exceptions: 1. Knowledge: The lessor must have knowledge of the latent defect. The establishment of the lessors knowledge of the latent defect can be established as actual knowledge or as wilful blindness, that there was no actual knowledge of the defect, but knowledge of other factors related to the defect. 2. Fraud. If the LD has done something fraudulent in order to conceal what would have been a patent defect, then there is a duty to expose and the LD would be liable for failing to disclose. 3. Health and Safety: Where there is knowledge of a physical defect that would endanger the safety or health of the lessee or the lessee’s family there is a duty to disclose. 4. New Demises: in the sense that the subject matter of the demise was not completely constructed when the LD and T enter into the lease. I.e. apartments that are leased prior to construction where at the time the lease is entered into the premises are not finished, then there is an implied warranty that the premises will be fit for the purposes for which they were intended. Fitness includes an implied warranty that they were built using proper materials and workmanship. This does not apply to significant renovations, as the building is considered a used building. -This case is important because it clarifies whether the breach had to be a physical one. Millet said that it was no longer necessary that there be a direct physical interference for there to be a breach of covenant. -Hoffman’s comments with respect to the operation of the covenant being forward looking. It makes a LD liable for substantial interference that takes place after the LD or T enter into a lease. The covenant cannot compel the LD to remedy defects of the past. 581834 Alberta Ltd v Alberta (Gaming and Liquor Commission), 2007 ABCA 332 Facts: Appeal by the plaintiff from the dismissal of its action claiming damages for breach of a covenant of quiet enjoyment. In 1980, the respondent constructed a liquor store on land that was part of the Londonderry Mall in Edmonton. The land was owned by Lehndorff Property Management. Gentra Canada Investments held a mortgage on the land. In 1990, the respondent moved locations and entered into a new lease with Lehndorff (the "headlease"). The lease was for a term of 40 years. In 1993, the respondent sold its retail liquor business to the appellant. As part of the sale, the appellant and the respondent entered into a sublease. The sublease was for a term of 37 years and contained a covenant for quiet enjoyment. The headlease required Lehndorff to use reasonable efforts to have its mortgagees execute a non-disturbance agreement, if so requested by the respondent. No request was made and no agreement was executed. Lehndorrf defaulted on the mortgage and in December 1995, Gentra obtained an order for foreclosure. The appellant made an arrangement with Gentra to remain in possession; however, in April 1996 Gentra was granted possession of the premises. In order to remain in the premises the appellant negotiated a lease with Gentra at a greatly increased price. The appellant carried on business from the premises until the end of 2000. In 2001, it commenced its action claiming damages for breach of the covenant of quiet enjoyment. The trial judge held that the covenant was not absolute. It did not protect the appellant from all interference, but only from hindrance or molestation by the respondent or any other person claiming by, through or under the respondent. The interference suffered by the appellant was caused by Lehndorff's default on the mortgage and Gentra's subsequent foreclosure. As Lehndorff and Gentra were superior in title to the respondent, they did not claim "by, through or under" the respondent. Mortgage held by Gentra | | Lehndorff Head Land Lord | | 40 year lease Liquor Commission | |37 year lease Alberta Ltd Issue: Does the covenant for quiet enjoyment offer protection that extends to the foreclosure of a mortgage granted by the head landlord? NO Appeal Dismissed Page 38 of 137

Reasoning: the trial judge held that the covenant was not absolute -the covenant did not protect the appellant from all interference, but only from hindrance or molestation by the respondent or another person claiming by through or under the respondent -the appellant was interfered with by Lehndorff’s default and Gentra’s foreclosure. As L and G are superior to the resp, they did not interfere “by through or under” the resp. -the mortgagee exercised their own right. Ratio: Where a default by a landlord is out of the control of the sub-landlord, then the sublessee cannot rely on the covenant for quiet enjoyment Class: Notes: Owen v. Glad -a few days after possession there was interference with the T by the LD’s workers. - to protect the numbered company there would have to be both a covenant for quiet enjoyment as well as a covenant that allows the # co o make mortgage payments on behalf of the LD if they default, thus protecting their interest COVENANT FOR NON DEROGATION FROM GRANT 1. Harmer (Appl/Pl) v. Jumbil (Nigeria) Tin Areas, Ltd. (Resp/Def) (lessee - wholesale explosives merchant) v (lessee – tin mining company) (1921) UK CA – SM 87 Not just physically less fit, but legally less fit for purposes S ―――― ―――――――― D │21 yr lease in 1911 │60 yr lease in 1919 │H’s Covenant: │ │- only to use lands only as │ │ an explosive magazine │ │S’s Covenant: │ │- quiet enjoyment │ │ │ H (Pl) J (Def) Facts: In 1911 S leased to Pl premises on tin mines that had been mined out and abandoned for about 50 years. Pl built a magazine on the property for storing explosives. In order to be licensed for storing explosives, magazines had to be built at certain distances prescribed by regulation from other structures. Pl’s magazine complied with the regulations and was duly licensed. In 1919 S's successor in title, D, leased the land around Pl’s land to the Def to mine for tin. Some of Def’s workings and structures were built closer to the magazine than the explosives regulations allowed. Pl’s license to store explosives would have been lost had the buildings been allowed to remain. Pl brought an action against Def alleging breach of the implied covenant of non-derogation from grant. Issue: Is the principle that a grantor cannot be allowed to derogate from his own grant applicable under the facts of this case? (Is there an implied obligation of non-derogation from grant?) YES (injunction granted) – appeal allowed Reasoning: - Privity - Def admitted that he was bound by such obligations in the lease as if he were the original lessor, S. (Hard to know why this is the case, maybe J’s lease contained term that he would be bound to all obligations of S. Or maybe it was a true restrictive covenant. Or maybe lawyer was incompetent to concede.) - Knowledge of lessor at time of the lease as to terms of the building’s use as an explosives magazine? At the time the lease was made S knew, or ought to have known, that a license was necessary for the operation of a magazine, and that for a license to be valid other buildings and structures had to be a certain distance away. - Extension of covenant – the premises do not need to be rendered physically unfit for breach of the covenant. What matters is that the premises have become unfit for the purpose for which they were demised - Def’s actions made Pl’s land unfit for the purpose for which it was leased, and S knew, or ought to have known, that such actions would have made Pl’s land unfit. - Pl was entitled to an injunction preventing Def from carrying on operations that would jeopardize Pl’s license Page 39 of 137

Ratio: Where a lease has been made for a particular purpose, the lessor is under an implied obligation not to use his own land in such a way as to render the leased land unfit, or materially less fit, for the purpose for which it was leased. The premises do not need to be rendered physically unfit for breach of the covenant. What matters is that the premises have become unfit for the purpose for which they were demised. Summary: Lessor had an obligation not to use the lands for an unfit purpose, difficult to check. Foreseeability is important for a breach of this covenant. Here the Court assumed landlord knew of limits to H's licence. Refers to a physical, not economical interference. Must sue in equity. Concession was made here to allow the tenants to sue each other because they were in same position as the landlord. Class: Harmer argued that by allowing J to infringe on H’s grant, S was in breach of the covenant Applies to freehold and leasehold conveyancing Three branches: 1. existing or apparent easements 2. implied easements 3. Non Derogation of grant - there is an implied obligation arising out of the purposes for which the premises are demised that the lessor will not do anything that will render the demise materially less fit for the purpose for which they are intended. This restricts the use of the land retained by the lessor. Where the purpose of the lessee is known or should be known by the lessor, then a duty is imposed on the lessor to not use their retained land in such a way to make the demise land unfit or materially less fit. -the lessors knowledge is absolutely crucial. It must be established, the onus on the lessee, that the lessor had knowledge of the purpose the lessee intended to put the land. -to render the land less fit or materially less fit it does not need to be physically rendered less fit or materially physically less fit, it is enough that it be legally less fit. -there are very few reported cases specifically decided on a breach of the covenant of non-derogation of grant because to make this breach will usually also mean breaching the covenant of quiet enjoyment. Review the notes following this decision. Note 2: COVENANT RELATED TO THE CONDITION OF THE PREMISES 1) In a commercial lease can say anything you want 2) Statutes are silent. RTA s.16(c) promises that the premises will meet the standards at the beginning of the term and remain at those standards throughout the term. This is not the case for non-residential tenancies. 3) No common law duty on LL to ensure premises are fit for habitation or fit for use intended  Caveat (lessee) emptor - If want covenant like that have to contract for it Exceptions: - If the demise is for a short term - If the demise is for furnished premises, then there is an implied covenant then the premises will be fit for habitation at the commencement of the term. There is no continuing obligation, it is spent at the beginning if it is complied with. Fitness for habitation at commencement of the term The scope of the covenant - The same principles and limitations apply to this CL covenant as do the covenant for quiet enjoyment and the covenant of non- derogation of grant. - ‘Patent defects’  Defects capable of being found upon inspection. Landlord is never liable for these defects. You should have found them. Caveat emptor . - ‘Latent defects’  Occur later. Landlord liable only when they have taken steps to conceal those defects and has therefore made a fraudulent representation. Also caveat emptor . When defect of which landlord is aware can threaten health or welfare of tenant or family, landlord is obliged to disclose or be liable to tenant. - What is important for this covenant is what is not there / included in it Conditions for the covenant to apply - Only applies to furnished premises. Usually only applies to residential tenancies but courts have ruled that movie theatres, for example, can be furnished premises and therefore the covenant will be implied. - The distinction is that it is a furnished tenancy. CHECK THE NOTES - Only applies if the tenancy is a tenancy of a relatively short duration. Page 40 of 137

Under Statute: (a) Commercial: no provisions in LTA or general LL & T statutes for commercial tenancy to indicate that this covenant exists. (b) Residential: - RTA s.14 indicates that the premise be habitable at the beginning of the tenancy (or can sue) - s. 17(3)(a & b) RTA say that a LL can enter residential premise to make repairs and inspect...but implies no duty to repair, only owner to enter to do so. By agreement: LL & T can make whatever contractual arrangement that they choose. - commercially the tenant usually receives the covenant to fix. Under common law: cases give the exceptions to that general rule - No CL duty that premises be fit for habitation, in a good state of repair, or fit for the purpose for which they are rented. - CL essentially follows rule of caveat emptor - Exceptions (don’t apply if lease says otherwise): 1. Lease of short duration of furnished premises  premises must be fit for decent and comfortable habitation (this is the implied covenant)- Otherwise, T is entitled to rescind ( Smith v Marrable ) 2. Where the premises are in a state of construction by the L when the parties enter into the premises  premises must be in a good and workmanlike manner and fit for the purpose for which they were intended (this is the implied covenant) So, there are three exceptions: 1. Lease of short duration of furnished premises  premises must be fit for decent and comfortable habitation (this is the implied covenant)- Otherwise, T is entitled to rescind ( Smith v Marrable ) 2. Where the premises are in a state of construction by the L when the parties enter into the premises  premises must be in a good and workmanlike manner and fit for the purpose for which they were intended (this is the implied covenant that the premises will be properly built using proper material and that it will be fit for the purposes for which they are intended by the T) 3. RTA section s. 16(c) - Now, in AB no longer need to use Smith v. Marrable in residential context b/c of RTA - If we were to ‘note up’ Smith v. Marrable there are some recent cases in Canada in the past 10 yrs – all concerning commercial premises - Try quiet enjoyment and the Smith v. Marrable section - So far hasn’t been successful – courts are not ruling out that the exception may apply to commercial premises but not winning w/ the argument so far Non ResidentialTenancy -in nearly every case the lease will have terms obliging the T to keep the premises in proper repair -the standard will require the T to keep the premises in a T like state of repair with reasonable wear and tear excepted. A T should never accept a lease that does not except wear and tear. -if a T accepts a covenant to keep the premises in a T like state then they have to keep it in a condition that it was in at the commencement of the term. -if the T has accepted an obligation to “put and keep” the premises in a state of repair they have accepted an onerous condition to correct deficiencies that existed at the time of commencement. Manchester v. Dixie Cup -look at a covenant to repair very closely Obligations Relating to “Repairs” SM 87 - Rules of waste (common law): 1. All tenants are responsible for equitable waste 2. A tenant for a term of years is responsible for voluntary or permissive waste (all types of waste) 3. A periodic tenant is responsible for voluntary waste but not permissive waste - In addition , period tenant is liable to keep premises wind and water-tight, fair wear and tear excepted – very obscure! - Denning in Warren v. Keen [1954 QB] : Page 41 of 137

- The tenant must take proper care of the place. He must, if he is going away for the winter, turn off the water and empty the boiler. He must clean the chimneys, when necessary and also the windows. He must mend the electric light when it fuses. He must unstop the sink when it is blocked by his waste…But apart from such things, if the house falls into disrepair through fair wear and tear or lapse of time, or for any reason not caused by him, then the tenant is not liable to repair it. Lane v. B-Line Express Ltd. (SM 114) (landlord) v. (tenant) [1976 AB] Facts: Condition in commercial lease to keep the premise in good condition by the T (B-Line), less regular wear and tear. Lease for three years; once fulfilled B-Line vacated. Damage caused by deterioration of wear and tear. Damage to loading dock bumpers and some walls. B-Line argues building used in normal commercial manner and damage is normal wear and tear. Lane argues that similar tenants prior to B-Line did not create this much damage. Issue: Could the damage that existed be classified as fair wear and tear? NO  After fair wear and tear continues for a while without repair, other damage tends to flow from the initial damage Reasoning: - The proviso "reasonable wear and tear" is narrowly constructed by the courts - It may exempt the tenant from nominal damages due to reasonable use of the premises but if damages goes beyond that the leasee is liable - Leasee has right to use the land and not run down the capital - Lessee restrained by rule of waste - Uses Lord Denning's lost tile example Ratio: the tenant must keep the premises in the state of repair in which they were at the commencement of the term excepting reasonable wear and tear. Class: -the onus of establishing that damage falls within a reasonable where and tear exception falls on the T not the LD -reasonable wear and tear means the reasonable use by the T and the ordinary operation of natural forces. -the most important question in this case is if the T does nothing to prevent the consequential damage once wear and tear have occurred, then what? -where damages are caused as a result of reasonable wear and tear then the T cannot sit back and allow consequential damage to happen. -if a T does make repairs for damage that is classified as reasonable wear and tear, then the LD can look to the T for reimbursement. -a T should always make repairs and look to the LD for compensation. M. Tenant's Covenant to Pay Rent – Rent is SACROSANCT! Tenants covenant to pay rent: - the LD has a common law right to recover a reasonable sum for occupation -the rent must be certain or capable of being rendered certain. -non-payment of rent may be enforced by an action for money judgement, or the remedy of distress, or by the threat of forfeiture if the lease contains forfeiture clause. -a tenant may only withhold rent under two circumstances: 1. under s 17 of the RTA a tenant who has entered into a written agreement, may suspend payment until they are presented with a copy of the written residential tenancy agreement. 2. a T may apply to the court under s. 37 (1)(b) for an abatement of rent to the extent that the breach or contravention deprives the T of the benefit of the residential tenancy agreement. The LD has a self help remedy. The LD may serve the T with a 14 day notice of termination for failure to pay the rent. The tenancy is terminated at the end of the 14 days if rent is not paid. -it is not advisable for the LD to do this because the T may vacate at night and trash the place before leaving. It is better to apply to a Master in Chambers of the Court of QB and make an ex parti motion. The Master in Chambers then grants a notice of termination and a writ of possession. This is best done aon a Friday afternoon so that the T cannot do anything about it until Monday. Page 42 of 137

Remedy of distress -under part 12 of the Civil Enforcement Act, this is a self help remedy. -the Act gives certain exceptions of seizures for a T  LD can take possession of all of the goods and chattels on the property in common law if the rent is not paid  The Ld’s right of distress is a right to take possession of the goods and chattels of and then sell the goods within the means delineated in the said act  The landlords right of distress arises out of the LD/T relationship o If the T has not paid the rent and the LD repudiates the lease his right to distress ends at the point of repudiation  If the tenant is in arrears for rent, the landlord can seize the tenant's goods and sell them to pay for the arrears in rent.  Not used often by landlords in Alberta because it acts to affirm the tenancy.  In a commercial tenancy, if the landlord seizes and sells the tenant's property, the tenant will be unable to make money to pay the rent in arrears. Therefore in that case it would probably be best for the landlord to terminate the relationship.  Remedy is governed by the Civil Enforcement Act in Alberta. Prior to the Act, the landlord could exercise the right of distress himself. Now, the landlord must use a civil enforcement agency licensed under the Act.  Part 10 of the Act - Exemption from seizure: Chattels that are required by the tenant for day to day living are exempted from distress. This includes most vehicles worth less than $5000 that are required for work.  Overall, the cost of distress will probably outweigh any money made from the sale of second-hand goods.  If the landlord has exercised her right of re-entry and terminated the tenancy, distress will no longer be available. Landlord’s Right to Distress for Rent A remedy that allows the LD to enter onto the demise of the premises and seize personal ppty owned by the tenant that the LD finds on the premises. Initially the LD’s common law right of distress only allow the LD to seize and take possession of the tenant’s personal ppty where the tenant was in arrears for the payment of rent. It must be a legal tenancy. Originally the LD could not sell that ppty rather by taking possession it put pressure on the tenant to come up with the rent, the CL evolved so that in addition to seizing ppty the remedy of distress was extended to then allow the LD to sell the personal ppty and put proceeds towards the arrears of the rent. B/c distress is as a result of arrears, if the LD terminates the tenancy for any reason including the non-payment of rent prior to exercising the cl right to distress, once terminate the LD is not entitled to exercise the right of distress after the termination. Termination and distress are mutually exclusive remedies. As a result, if advising a LD on the remedy of distress, if exercising right of distress, do it before you terminate the tenancy. Otherwise, if you terminate and then exercise distress, it will be a wrongful distress and = a trespass to chattels and the tenant can take action against you. Seize before you terminate. Only extends to personal ppty found on the premises. Distress only goes to rent, not to any other amounts the tenant may owe. CL says if you have only a tenancy in equity, not a legal lease, but an agreement to lease, the LD can have a right to distress provided the court would order special performance of the agreement to lease then that equitable tenancy also would entitle the LD to levy distress against the personal ppty found on the premises. Landlord’s Remedy of Distress: This is an extraordinary power that the law is giving to this particular class of creditor (the LD) – where the tenant becomes a debtor for not paying the rent. No other class of creditor is given a CL right of distress. It gives the LD the right to enter the premises and seize personal property as long as the tenancy is in existence and the rent is in arrears. The CL has evolved where the LD can now sell the ppty and put the proceeds towards the arrears of rent. It is a draconian remedy! ALL other creditors share equally in the event of a bankruptcy. It is a fundamental principle that creditors should share and share alike – but this is not the case with a LD. S.104 is a draconian exception – the LD has the right to levy distress which applies to residential tenancies and non-residential tenancies. This right is subject to the exemptions that are given to all debtors under s.88 of the Civil Enforcement Act. Exemptions from seizure:  88.(a) A LD cannot seize one year’s supply of food owned by the tenant who owes rent  88.(b) A LD cannot take the necessary clothing of the tenant or member of tenant’s family provided that the clothing is not worth more than $4,000.  88.(c) Cannot take household furnishings and appliances. For a residential tenancy the furnishings include a fridge and stove and microwave, dinning room suite, baby carriage – only to the extent of $4,000. Everything in excess is fair game. For non- residential tenants it is the sum of $1,000.  88.(e) A blanket prohibition that a LD can’t seize and sell medical aids and dental aids.  88.(h) Personal ppty used by the tenant to earn income from the tenant’s occupation to a max. $10,000.  88.(i) Where it is a farm operation, personal ppty required to carry out farming operations for a year.  88.(d) A vehicle is not exempt. Page 43 of 137

 The ppty must be found on the premises – the vehicle must be part of the premises otherwise it is an illegal act of distress. A car parked on the street is not on the premises. Cisakowski v. Fekete , 1984, Q.B. SM:105 Facts: Landlord instructed bailiff to seize sufficient goods to act as security for unpaid rent. But the tenant made an agreement with the landlord to leave the goods in the premises if the landlord changed the locks. The tenant would then have to pay the rent in arrears before he could re-enter the premises. He was given an option either we change the locks and leave the chattels or we take to chattels Issue: Did changing the locks constitute a forfeiture of the lease by the landlord so as to invalidate the seizure of goods? NO (A landlord cannot have both remedies of forfeiture and distress at the same time.) Ratio: Usually an eviction would amount to a termination. At common law, changing the locks is equivalent to eviction = termination ( Country Kitchen ). But not in this case because the tenant made an agreement with the landlord that the locks would be changed until the rent in arrears was paid. Therefore, eviction did not lead to termination of the tenancy. The tenant could re-enter into possession if he paid the rent in arrears. Therefore the distress was lawful because it occurred while the tenancy was on going. The LD’s CL right of distress is a remedy that is only available during the continuance of the tenancy relationship. If the LD takes steps prior to exercises the right to distress he terminates the tenancy then the right of distress disappears. Termination of the tenancy terminates the tenant’s obligation to pay rent and terminates the remedy of distress arises as it arises out of the obligation to pay rent. Therefore they are mutually exclusive remedies – one or the other. Where the LD simultaneously exercises the CL right of distress and terminates with the consent of the tenant then the levying of distress is a valid distress. There was no eviction (termination) and therefore the LD retained the right to remedy of distress. Changing the locks without consent of the tenant is a termination, an eviction by the LD. It is a serious and irrevocable act by the LD that is inconsistent with the continued existence with the tenancy. This act must be done by the LD with an intention to evict the tenant. In this case there was no intention to terminate when changing the locks therefore there was still a right to remedy of distress. Class:  When a LD changes the locks it constitutes an eviction, and an eviction as a matter of law terminates the LD/T relationship o As a result no longer had the right to exercise the remedy of distress  Eviction is defined as: o When the landlord does any unequivocal act terminating the LD/T relationship  Here they argued that the tenant consented to the locks changing and that did not amount to eviction, and at the time of levying the distress the relationship still existed.  Ian says that distress is being used more and more by residential landlords  he asks is this fair?  Landlord cannot seize the goods of a third party (2 nd issue in the Fekete case that is not addressed)  The LD T relationship was not terminated as the T was given a choice in the matter.  Whatever sales Fekete makes are considered part of the seizure, so if Fekete carries on business and pays off the debt, then the restriction is lifted.  Property rules can be blurred through agreements made by LD and T Notes:  Whenever a landlord is faced with non-payment of rent, there are a number of options available. Therefore you must be careful to select the option that is in the best interest of the client.  When exercising a seizure in case of distress, be certain to be very careful and specific with respect to tenant, premises, and the goods of the tenant that you want to be seized.  When does landlord have right of distress? - Anytime there is arrears in rent, and - Anytime the landlord/tenant relationship continues.  Whenever the landlord/tenant relationship is terminated, so to is the remedy of distress. Can’t have both at the same time.  Forfeiture terminates the landlord/tenant relationship.  Does the changing of the locks constitute an exercise of right-of-re-entry and therefore terminate the landlord/tenant relationship? - Generally yes, but not here since the landlord and tenant came to an agreement regarding this. - The contractual landlord/tenant relationship here overrode the property landlord/tenant relationship. - Remedy of distress is in conflict with s.22 of the RTA. The tenant can refuse the LD’s access to the premises – but then the LD can give 24 hours notice to the tenant. Page 44 of 137

N. Termination of Landlord-Tenant Relationship 10 ways to terminate: 1. By expiry: Fixed term tenancy terminates automatically at the end of the term. 2. By death of life tenant: Tenancy for life expires when tenant dies. 3. By notice to quit: At common law, all tenancies can be terminated by giving the appropriate notice. Now that notice is governed by the Residential Tenancies Act in the case of residential tenancies. (see s.4.1(2)) - In a residential tenancy, the Act stipulates the length of notice and the reasons that a landlord must give in order to terminate by notice. - The only way to terminate a residential tenancy by notice is: - (1) if the landlord need the premises for himself or his family, or - (2) If the landlord has sold the premises and the new owner has given written notice to the tenant that he wants to terminate the tenancy. - Landlord must give 180 days and a valid reasons for a termination of a periodic tenancy - Valid reasons are: - (1) Major renovations - (2) Sold the premise to a 3 rd party (you can sell property to yourself) - (3) Need premise for himself or family member - (4) requires premise for a business - Notice for periodic month to month tenant is 1 periodic month and for the landlord it is 3 periodic months and a valid reason - Notice to quit has to be given in the proper form (page 115) - Notice has to comply strictly with the substance (valid grounds) and the form – if it is in improper form the court will rule against it 4. Forfeiture for breach of condition or covenant: Covenants and conditions must be addressed differently. Breach of Condition: In the operation of a conditional limitation you must properly construe the term. - If it is a condition precedent and it hasn't been met at, the landlord-tenant relationship won't come into existence at all. - If it is a condition subsequent, a breach of the condition will give the landlord a right of re-entry to terminate the tenancy. Breach of Covenant:  In the absence of an express clause in the lease giving the landlord or tenant the right to terminate for breach, in general a breach of a covenant will not entitle either party to terminate the lease.  The general rule is a breach of covenant by either party will not ordinarily be allowed to amount to a forfeiture – there must be a re-entry clause a proviso it is not automatic. It is up to the innocent party to decide whether they want to utilize the breach of covenant to give rise to forfeiture - The general rule is that the landlord will be able to re-enter and take the premises for breach of any covenant provided that the landlord has reserved a right of re-entry. (In the absence of an express reservation of the right of re-entry, a court will imply a right of re-entry only if the tenant's obligations are framed as conditions rather than as mere covenants.) - However, since Highway Properties v. Kelly Douglas affirmed the role of the law of contract with respect to breach of covenants, the innocent party may be entitled to terminate if there has been a fundamental breach. (See 361488 Alberta Ltd. v. Westwinds Club and Wesbild Enterprises v. Pacific Stationers for definition of a breach that goes to the "root" or to the "foundation" of the contract.) - A court may grant relief from forfeiture if it may be equitable to do under the provisions of the Judicature Act . ( Wesbild Enterprises v. Pacific Stationers ) - The usual remedy for a breach of covenant in a non-residential lease is damages. 5. By Court Order: Under the provisions of the Residential Tenancy Act :  a court may order the termination of the landlord-tenant relationship (sections 23 and 29).  a landlord can apply to the Court for a termination of the landlord-tenancy relationship when there has been a breach of the s. 16 covenants.  if the landlord breaches s. 14 covenants, the tenant can apply for termination. 6. By eviction  Eviction is not termination  the effect of eviction does suspend the tenants obligation to pay rent while the tenant is out of the premise Page 45 of 137

 Test for eviction : "The landlord must take steps of a grave and permanent character with and intention to deprive the tenant of the benefit of the tenancy." ( Johnston v. Givens ) - There must be an intention on the part of the landlord. Can be a difficult test to meet. - Where the landlord evicts the tenant: - It may terminate the tenancy. - Must consider repercussions of termination because the rights and remedies available to both landlords and tenants depend on the continued existence of the landlord-tenant relationship. - For example: The landlord's right of distress allows the landlord to enter the premises and sell the goods and chattels of the tenant if the tenant has not paid rent. But by evicting the tenant, the landlord loses any right of distress. 7. By surrender: (see Deerfoot Mall v. Burt and Highway Properties v. Kelly Douglas ) - The tenant does certain actions indicating an intent to terminate the lease. Can occur in 2 ways: By express surrender, or By operation of law. - Abandonment is a question of fact. Would a reasonable LD believe the premises to have been abandoned? - Where the tenant abandons the premises and the landlord accepts the abandonment then that is called a surrender. The effect of surrender is to terminate the landlord-tenant relationship. Just like eviction, landlord must consider that accepting the abandonment will result in the loss any rights and remedies available within the landlord-tenant relationship. - Deerfoot Mall v. Burt was a case of express surrender. - Most cases of surrender will be by operation of law (e.g. Highway Properties v. Kelly Douglas ). Most often the tenant will abandon the premises and stop paying rent. If the tenant has done some act so that the continued existence of the tenancy would be impossible then that would be a surrender by operation of law. - Before Highway Properties , the landlord had three remedial options in such a situation: i. Do nothing  act as if the lease was continuing and sue for the rent. ii. Acceptance of surrender  would cause the termination of the tenancy and the landlord would immediately sue for all of the damages suffered up to the date of the termination. iii. Agency option  landlord may accept the surrender and give notice to the tenant that he will take possession of the premises on behalf of the tenant and will re-let the premises in the tenant's interest. At the date which the landlord re-lets the premises, the landlord-tenant relationship will be terminated. Damages will be fixed up to the date of re-letting. - But the Highway Properties case established a fourth option: iv. Prospective loss - Landlord can elect to accept surrender and termination of tenancy but can reserve all of the contractual remedies given to the landlord by giving notice to the tenant. This is recognition of the contractual doctrine of anticipatory breach and therefore the landlord can claim not just retrospective damages but also prospective damages. This option is dependant on the law of contract and therefore brings with it the obligation on the innocent party to mitigate any damages suffered. For example, the landlord must try to re-rent the abandoned premises as soon as possible. 8. By frustration:  There is still some doubt whether frustration applies to landlord-tenant relations. However, under the Residential Tenancy Act frustration has been codified . The weight of authority also suggests that frustration would apply to non-residential tenancies as well.  Has been applied in Canadian Courts – most of them holding that the change of circumstance was so substantial that it deprived the parties of there rights  House on the cliff example  Where the subject matter of the demise is destroyed then both parties are relieved of there obligation under the leasehold estate 9. By merger:  Termination whereby the landlord acquires the tenant's interest or whereby the tenant acquires the landlord's interest. For example, when the tenant buys the premises of the tenancy from the landlord. Here, the lesser estate merges into the greater therefore extinguishing the lesser estate.  Where the landlord acquires the tenants possession or the tenant acquires the landlords interest  Merger is no longer a matter that is to be determined at Common Law  since the SCC decision in Fraser Reid v. Dromotsekos. It does not operate automatically o Now it is determined in equity according to the intention of the parties 10. By operation of statute:  Some statutes provide that the landlord-tenant relationship will terminate because of non-compliance with the statute. e.g. Public Lands Act  the grazing lease. Bankruptcy and Insolvency Act  if the landlord or tenant becomes bankrupt, the trustee in bankruptcy may elect to terminate. Page 46 of 137

Distress for Rent Act (1737)  chapter 19 s. 16 – this act provides a unique way for terminating the LD/T relationship BUT only applies to tenancies at a rack rent (any tenancy where the rent is equivalent to or of the full value of the tenement). Applies to any case where the tenant is a full one year or more behind. Also applies where the tenant has abandoned the premises and not left enough goods and chattels behind to create a proper distress claim by the LD. 11. Tenancy at will  Any party can terminate this tenancy if there is an act that is inconsistent with the will  Requirements of Parties:  The landlord must make a demand for possession and/or a notice to quit  Tenant is required to give notice to quit AND must give up possession of the premise  Death of landlord or tenant is a termination of the will 12. Tenancy at Sufferance  Can be terminated at any time  No requirement of demand on notice  Can be terminated by tenant by just leaving and needs to give NO notice 13. Fundament Breach  Depends on if you view the LD/T relationship as a contract relationship or a property relationship 361488 Alberta Ltd. (Appl) v. Westwinds Club (Resp) (SM 124) (landlord) v. (tenant who sold premises to Appl) [1989 AB CA] Facts: Westwinds sold property to the appellant, then leased the premises back. Agreement made in Nov/88 but not signed until March/89. Lease dated before the sale (facts not well outlined in judgment) Relevant facts in terms of forfeiture: - LL gave notice saying here are these many breaches (10 or 12) and out of all of those, 2 of them were true - T didn’t do what LL wanted - LL took possession in self-help kind of way - So T applies to Court for: - First argument – the LL was not entitled to re-enter b/c no breach of covenant - In the alternative (if re-entry was valid), forfeiture Issues: 1. Whether tenant was really guilty of breaches of the lease. YES (failure to repair roof & repaint exterior) 2. Whether the notice of termination served on the tenant was valid. YES, so re-entry was legal 3. If so, whether the tenant should be granted relief from forfeiture and under what terms. YES – appeal allowed Reasoning: 1. Tenant’s breaches - Repairs to the roof and repairs to the exterior painting and grouting were the T’s obligation under the lease, therefore the failure to make those repairs within a reasonable time constituted a breach. 2. Notice of termination - The landlord had the option of obtaining possession under RTA or by the terms of the lease (by taking possession after notice). Landlord adopted latter course. - Yes, it’s valid - Cite Monarch Timber Exporters where SCC decided that notice provided by LL is valid even if only has 1 valid ground buried in many invalid grounds - Important to note court will actually scrutinize a notice o If there are major discrepancies in things other than the grounds, those will invalidate the notice – this is a different rule than the rule about grounds (e.g. if get address wrong, or name of T wrong) – Fortune Village Inn Ltd. 3. Relief - Court chose to grant relief because the value of the leasehold estate forfeited is large as compared with the cost of repairs that constituted the breaches of the lease and because many of the landlord's reasons in the notice of termination were so onerous as to obscure valid reasons - The balance of value of leasehold estate v. repair costs makes client look good for equity - Another reason to let Westwinds back in is that the LL Page 47 of 137

- Give relief subject to conditions (which Court can do as per s. 10 of Judicature Act) o Make T take care of roof, painting, taxes, etc o But don’t make T pay rent for time they were out of possession b/c LL used the self-help route rather than the official one  This is essentially a fine on the LL for using the self-help remedy – a penalty to the LL for not going the formal route - T was given possession but had to make repairs and pay taxes. Ratio: As long as the notice of termination contains at least one valid reason, then the notice is valid (even if it contains other invalid reasons) - Court has power to relieve against forfeiture (Judicature Act, s. 10) - Landlord changing the locks = exercising the right re-entry. Class Notes: - relief from forfeiture is an equitable remedy. Like all equitable remedies, it is at the discretion of the court. A court of equity will only exercise discretion when it is of the view that it is just and equitable to do so. -if the damages suffered by the LD as a result of the T breach are small in comparison to the T los of the Tenancy then relief may be granted. The court will look at what damages will be suffered and the effect on each party. -whenever a court exercises equitable discretion and grants relief it is always on conditions. A court will never grant relief if the T is unwilling or unable to remedy the breach that gave rise to the right of re-entry. Ability and willingness is pre-requisite. -those conditions which in the view of the court would put the parties in the position they would have been in but for the breach by the T Johnston (App/Pl) v. Givens (Resp/Def) (SM 126) (landlord claiming for rent) v. (tenant that abandoned & refused to pay more rent) [1941 ON CA] Was the leading case by surrender by operation of law (implied surrender) - when re-let to the new tenant the original LL-T relationship is brought to an end and T’s obligation to pay rent is brought to an end Facts: Pl rented an apartment to Def for a term of 2 years beginning Oct 1, 1939. The lease contained specific covenants for Pl to supply heat and hot water. However, the heat was often shut off for several hours at a time, as the heating equipment shut down if there were foreign objects among the coal. After occupying the apartment for 2 months, Def abandoned it and refused to pay any more rent. Pl tried to re-let the premises and did so after 5 months. Pl brought an action for damages for loss of rent, and Def counter- claimed damages for breach of the covenant to supply heat. The trial judge dismissed both actions, and Pl appealed. LL sues for rent for Dec, Jan, Feb, March rent when nobody lived there and also for difference b/w original rent and amount new T is paying for the duration of that 2-yr lease Issue: Is the Def allowed to treat the lease as at an end because the Pl breached the covenant to heat the premises? NO Holding: The tenant has no right to abandon premises and not to pay rent. Generally the tenant must pay rent. But in this case, the tenant must only pay for the time during which the tenancy was unoccupied. Reasoning : - There was no doubt that the apartment was uninhabitable in the winter if it was not heated. - However, Def had no right to abandon the premises because Pl’s covenant to heat did not go to the whole consideration for the tenant's promise to pay rent. Def still had the premises vested in him by virtue of the lease. - Nor could there be any implied covenant as there was in the cases of leases of furnished premises (see Davey v. Christoff ) because there was an express covenant covering heat. Def’s proper remedy was to bring an action against the LL for damages. - Although Def had not appealed from the dismissal by the trial judge of his counter-claim for damages for his expenses in moving, in allowing the appeal, the Court reserved to Def the right to damages arising from Pl's breach. - Def had also argued that Pl's failure to supply heat amounted to an eviction. The Court rejected this argument because on the facts Pl had not intended to drive Def out, a necessary element of "constructive eviction". - The test for eviction is: "The landlord must take steps of a grave and permanent character with and intention to deprive the tenant of the benefit of the tenancy." In this case, no intention on part of Pl to evict the tenant (here only accidental and temporary). - Eviction only suspends the right to pay rent = must be intentional eviction. - Accepted that the rent was due for the time that the premises were not re-let. Page 48 of 137

- Landlord had protection in lease for himself if T breached covenants, but nothing in lease for remedy for T. - General rule for default of express provision does not allow T to declare the lease at an end. T didn't reserve express right to quit the premises on breach of covenant by landlord (but landlord had right of re-entry for breach by T). - A mere breach of covenant by the landlord does not permit the tenant to terminate the landlord/tenant relationship or withhold rent. The tenant may only pursue for damages. Only leases that contain specific clauses allowing the tenant to terminate the relationship for a landlord’s breach of covenant. Ratio: In the absence of express provisions to the contrary, a LL’s breach of covenant does not allow the T to declare that the lease is at an end. In that case, the only remedy would be damages. However, the re-letting of the premises in this case is an operation by surrender of law that terminates liability of the tenant to pay rent from the date of re-letting. Class Notes: - covenant wasn’t good enough here b/c it said nothing about the remedy (i.e. if it was breached, the LL-T relationship is terminated and at an end  it should have said that) - SM 31, clause 10 of Metromatic lease (very T friendly) - Example of a clause that is very pro-tenant but this sort of clause would have been helpful here - Sort of the flip side of LL’s right to re-enter - w/out this sort of clause, the T’s remedy for breach of covenant  damages - this case illustrates that rent is sacrosanct – the Tenant’s covenant to pay rent is an independent covenant – no mutuality - this LL is suing for rent b/c rent is an independent provision - SM 127 – arguments made by T - Metromatic clause 10 should have been in there - Not being able to live there is a fundamental breach – total failure of consideration - Failed b/c can live there in other months of the year and still have the property interest - The place wasn’t fit for the purpose ( Smith v. Marrable ) - Lose this argument as well - Wasn’t a furnished room, was a S-T lease (2 yrs), plus there was an express term in the lease - Last argument by T is that he’s been evicted (b/c eviction would end the lease and would get rid of obligation to pay rent) - Loses argument b/c no evidence LL wanted to evict them - Eviction is (SM 127) Upton v. Townend  something of a grave and permanent character done by the landlord w/ the intention of depriving the T of the enjoyment of the demised premises - At least need a breach of the covenant of quiet enjoyment - Furthermore, it was all accidental – pin kept breaking, nobody’s fault - Even if LL didn’t want to accept abandonment (surrender) was sort of forced to - Surrender by operation of law - Tenant-friendly remedy  keeps damages down - Highway Properties did away w/ this - Imagine the RTA applies (b/c this is a residential situation) - T w/out heat or hot water  what can you do under RTA? RTA is a step forward but not much help – long time to process / get result - S. 16(c) – landlord’s covenant about minimum public health standards and under this LL would have breached covenant (no heat or hot water) - T can apply under s. 37 (more general)  only one ‘substantial breach’ by landlord which is s. 16(c) - But s. 28 is remedy for substantial breach by LL – can serve LL w/ 14 days notice for termination where: - Substantial breach required - S. 28(1)(b) – need an executive officer issuing order under public health act and the LL’s failure to comply w/ the order - Therefore T must have complained under public health act, have order issued to LL and not complied with, THEN can give 14 days notice - The LL can object under s. 28 (can file notice of objection) then stuck w/ notice under s. 37 for court to issue an order for either abatement of rent or termination of tenancy - To what extent is this case still good law? - For a LD to re-enter there must be a right of re-entry. For the T to terminate, there must be a covenant to terminate. If not the LD can seek damages for termination. This has changed due to the KN doctrine of frustration - Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd. (SM 129) Page 49 of 137

(building small mall) v. (operates grocery stores under name Super Value) [1971 SCC] Commercial Tenancy—Landlords Case Facts: The plaintiff, H, owned a shopping plaza, and on Oct. 1, 1960 rented out premises to the defendant, K, for 15 (to Sept. 30, 1975) years to run a supermarket – to be anchor tenant. Clause 9 was a covenant of continuous use by tenant (to carry on business). However, the shopping plaza did not prosper, and in March 1962 K closed its supermarket. K paid rent only until June, 1963, and H brought an action for damages. (closed store after 17 months but continued to pay rent and tried to find a subtenant). H sued in May of 1963 (b/c rent is paid up to June 1) . In its statement of defence K said that it had repudiated the lease agreement. In November 1963 H sent K a letter that said that it intended "to hold [K] responsible for any damages suffered by [H] as a result of [K]'s breach and wrongful repudiation of the said lease". (i.e. rent for 12 years and also inability to rent other premises for the 12 years, etc). H then made unsuccessful attempts to relet the supermarket premises. In 1965 H subdivided the premises into three units and rented the new units out. At trial and on appeal it was found that the doctrine in Goldhar (which is like Johnston v. Givens case- surrender by operation of law) applied, so that H was entitled to damages only up to the date of re-letting the premises. H appealed to the Supreme Court of Canada. - if doctrine of surrender by operation applies (like it did at CA) then T would not be responsible for rent after that - Laskin’s approach here is to hold T to their promise for the 15 yrs even though it has been re-let Issue: Can the landlord sue for prospective damages (as he would based on the law of contract)? Yes, the lease may be terminated but the landlord can get rent and damages. Reasoning: The Court allowed H's appeal. The case law had hitherto recognized three options for a landlord when a tenant had abandoned the rented premises. 1. the landlord could do nothing except insist on performance and sue for damages; 2. the landlord could terminate the lease and sue for damages up to the date of termination; and 3. the landlord could give notice to the tenant that the landlord was going to re-let the premises on the tenant's behalf. H's letter of November 1963 clearly did not put H within the third option. Rules of property law had treated a lease as a transfer of an estate in land, so an act by the landlord which was inconsistent with the tenant's estate amounted to the surrender of the lease by the landlord. However, It is no longer sensible to pretend that a commercial lease, such as this one before the Court, is simply a conveyance and not also a contract. It is equally untenable to persist in denying resort to the full armoury of remedies ordinarily available to redress repudiation of covenants, merely because the covenants may be associated with an estate in land. Therefore, a landlord could terminate the lease and still claim for damages afterwards. Ratio: In landlord-tenant relationships carried out in a commercial context with an obligation to carry on business there are contractual remedies. When accepted repudiation, don't lose right to sue for breach and to get unpaid rent. Class Notes: - beginning of contractualization of property law - still an unclear area of law  nobody knows how far contractualization of property law goes – still up in the air - lower courts use Johnston v. Givens analysis, but Laskin doesn’t - SM 132  Laskin says in the name of efficiency, this is a business contract, let’s use contract law and forget property and its antiquated estate notions - This message has been resisted – might be why things are still unsettled - A contract / business emphasis is an emphasis on efficiency whereas property is about status and about relationship - One reason Laskin dislikes surrender by operation of law is that it encourages landlord to not re-take possession but to sue every month for rent – leaving the space empty is unproductive, inefficient - SCC says now lease is dual character - Still an estate in property law w/ a LL-T relationship Page 50 of 137

- Also, the lease is a contract  essentially, contract remedies available (some of them, not all) - SM 133 great summary of property law’s approach to this pre this case – quoted often - The court doesn’t change this, it is still good law - Three mutually exclusive courses of action for LL to take where T breached or repudiated lease - May do nothing but insist on performance – sue for pmt of rent every month (no duty to mitigate) - May elect to terminate the lease, retain right to sue for rent up to that date of for damages up to date of termination for other breaches (essentially forfeiture remedy) - May propose to re-let the ppty on the T’s account and enter into possession on that basis 1. Used to be how LL would get around surrender by operation of law – do nothing except sue as rent becomes due (keeps LL-T relationship alive) 2. Take back premises and re-let them on T’s behalf  accept repudiation, terminate lease & sue for damages to date of repudiation (what surrender looks like) (no LL-T relationship anymore) 3. Version of keeping lease alive (version of first option and way around the second option)  what Laskin calls an unauthorized assertion of T’s estate, he almost laughs at it b/c who made LL the T’s agent?!  LL refuses repudiation, notifies T will re-let in T’s name & sue for any deficiencies in rent as it comes due (keeps LL-T relationship alive) - All three of these still exist – Laskin didn’t do away with them - Laskin ( Highway Properties ) added the “fourth option” 4. refuse repudiation, terminate property estate and sue for damages (damages include the present value of the future rent until end of term less actual rent received) – anticipatory breach for the future duration of the lease (no LL-T relationship anymore)  sue for the money now in anticipation for the future breach  this is contract law- you repudiate a contract and the person can sue for damages for breach on the basis that the contract’s been performed  in contract law you mitigate your damages  is there any obligation for landlord to mitigate his damages? NO! we haven’t gone that close to contract law – took principle of having contract fulfilled but mitigation didn’t come w/ it for this ‘fourth option’  most popular remedy in falling market / most attractive and also another way around surrender by operation of law (which LLs don’t like) - went from fairly tenant-friendlly surrender by operation of law to this very LL friendly solution  contract remedy w/out duty to mitigate - when market is falling, LL will want to hold T to old lease (w/ higher rental rate) v. rising market when LL will want to repudiate lease and get new, higher tenant - when 4 th remedy came out, there was thinking that there were pre-requisites to using it: o probably needed a “carry on business” clause (a.k.a. continuous use) (like clause 9 in Highway Properties case)  as years have gone by, this is no longer a prerequisite for Canadian courts (not considered a relevant fact in Deerfoot Mall case) o probably needed notice by the LL to the T of their intent to claim damages incl PV of unpaid future rent on base of anticipated breach (like letter on SM 131)  Today, yes w/in reasonable time ( Deerfoot Mall ) – yes you need notice  this is actually the key thing you need o Probably needed a “fundamental breach” by the T, not just any breach  Today, yes do need a fundamental breach by a LL or a T – will entitle the innocent party to the remedy of option number 4 - No issue about fundamental breach – Kelly’s act of abandoning and not paying rent was clearly a breach - T’s statement of defense was that he repudiates the agreement - LL responds with letter and amended statement of claim – since known as Kelly Douglas notice (will retake possession and try to re-let, but will hold responsible for damages) - Prospective damages – future rent (suing on anticipatory breach) and PV of future income - LL did mitigate by subdividing store and renting out Kat’s CANS - LL’s options prior to this case: 1) Refuse repudiation and keep lease alive – if do this, can’t re-enter the premises and relet the premises (so obviously no duty to mitigate). Have to sue each month for unpaid rent 2) Accept repudiation: a) expressly Page 51 of 137

b) impliedly (surrender by operation of law) - problem with this option is that it reduces the damages LLs can cliam (because don’t get rent once reputidation is accepted) 3) Notice of intent to sublet as T’s agent - LL gives notice to T prior to re-entering that it will be acting as T’s agent and will sublet the property - Subleasing keeps the headlease alive – keeps the lease alive and the property productive - It’s the notice that differentiates this option from #2 - Unilateral assertion of unauthorised agency – but too bad for T - All this case does is add a 4 th option (does not get rid of the 3) 4) Terminating the lease with notice and will claim contract damages - General principle in contract law is to put the innocent party in the same position they would have been had the contract been performed but with duty to mitigate - Signals that contract law is now part of commercial leases - Would have been cleaner if had gotten rid of other 3 options but didn’t - This is contract principle but without the duty to mitigate - When is this 4 th option available to the LL? a) Covenant of continual use – promise to continually occupy the premises – NOT A FACTOR b) Notice – LL said would retake possession & hold T liable on contract basis – CRUCIAL. If re-enter without notice you have option #2 kicking in. LL in this case waited 3 months and court said that was reasonable time c) Must have a repudiation or fundamental breach. Only applies if T or LL has breached a covenant and that breach is a fundamental one OR need a repudiation. - A Douglas Kelly notice without a fundamental breach or a retaking without a fundamental breach mean that the surrender will be by operation of law. Damages limited. Doctrine of Constructive Eviction - Pre-Highway Properties - sue for damages - constructive eviction - Test: something of a grave and permanent nature done by LL with intention of depriving the tenant of the enjoyment of the demised premises [Upton v Townend] - Highway Properties - fundamental breach: is breach serious enough? Have to look at specific lease. Can’t say that every breach of a covenant would be a fundamental breach. Have to look at the consequences on the tenant a surrender by abandonment is unequivocal evidence that the T will not be performing the conditions of the lease. It is the equivalent of an anticipatory breach in property. The traditional remedies available to a LD in a case of surrender by abandonment are: -elect to do nothing, and then sue for rent and damages on each occasion the rent is due. -the traditional property principle, the LD can accept the repudiation, terminate the lease and then sue for damages suffered from the date of the breach to the date of the termination. A LD would not be able to sue for prospective losses. -if the LD chooses the 4 th remedial option he must ive notice that th T will be liable for all prospective losses. -by expanding the rane of remedies available I brings the full gamut of KN obligations, which means that the LD must take reasonable steps to reduce and minimize the loss. The LD must make reasonable efforts to re-let the premises in order to mitigate the damages. -a landlord can have time to consider market conditions in order to elect a remedy that is most advantageous to them. - Wesbild Enterprises Ltd. v. Pacific Stationers Ltd. et al (SM 137) (mall – landlord) v. (tenant – stationary store with construction and competition hurting business) [1990 BC CA] Turns 4 th option around for T’s benefit (gets out of Givens situation) – use LL’s breach to justify abandonment (stop paying rent and can get damages) Not every breach of QE will be a fundamental breach – need to look at particular business and that particular tendency  it will be the consequences for that tenancy as opposed to the covenant itself Page 52 of 137

Facts: Covenant in lease to protect from competition within the mall. Save On increased the size of the stationary department, therefore the defendant changed the business to office equipment. Because of mall construction the deliveries couldn't be made properly, therefore the T's business suffered. T moved out and refused to pay rent (2 yrs into a 5 yr lease). Issues: 1. Whether LL breached obligation under schedule F for non-competition? - schedule F promise is made by T – no covenant by LL so therefore cannot be a breach 2. Did the landlord breach the lease by doing construction without getting the tenant's permission (under clause 14.03)  Has LL breached QE as amended by clause 14.03? - LL has to have this clause to protect himself from infringing on quiet enjoyment  cuts down the scope of the T’s quiet enjoyment - LL may interfere if: - No substantial alteration - T’s written consent 3. Did the construction work constitute a breach fundamental enough to terminate the contract – fundamental breach? - Definition of fundamental breach – SM 141 – 142  deprivation of substantially whole benefit of the contract ( Hong Kong Fir and Hunter v. Syncrude ) - majority only deals w/ 2 & 3 Holding: Yes, there was a fundamental breach that gave the tenant the right to terminate the lease. Reasoning: (Lambert J.A.) - contractual analysis gives the T the right to terminate for substantial breach - During construction there was a substantial alteration of ingress and egress of the premises (contrary to clause in lease) and therefore the pl. should have been informed and his consent should have been obtained. - majority indicated that because it was impossible to carry out an economically sound business it was a fundamental breach (needed consent to make alterations) - The circumstances of the particular tenant must have been known by the landlord at the time of the breaches. The breaches prevented deliveries (which were essential to pl.'s business). Therefore there was a substantial interference with the pl.'s ability to do business. - if no fundamental breach, the T only gets damages and can't terminate Dissent: (Hutcheon J.A.) - dissent felt that the store was still able to be used .... did not deprive T of the whole benefit of the lease (relied on Hong Kong Fir – “substantially the whole benefit” (Lord Justice Diplock) - also relied on Justice Wilson in Hunter Engineering v. Syncrude where she says “this exceptional remedy should be available only in circumstances where the foundation of the contract has been undermined” Ratio: Extension of Highway Properties to give contractual remedies to the tenant Class Notes: - saying that this was a fundamental breach…? Don’t push it any further than that (compare to case where guy had no heat and it wasn’t seen as fundamental breach b/c he could still use it in the summer months – that situation seemed much worse) Deerfoot Mall (Calgary) Ltd. (Appl) v. Burt (Resp) (SM 143) ( [1987 AB CA] Facts: P leased premises in a shopping mall to X who assigned to Y, who then sublet to D. Assignment and subletting were done without P's permission. P declared sublease to D invalid and set out to negotiate a new one with D personally. They agreed upon the contract but when it came time to sign for it D refused. D cleaned out store and served notice to surrender. Took P 5 month to re-let and did so at reduced rent. P sues D. P gave notice to D by filling a statement of claim 3-month later. D claims P had no title to let the premises to D in the first place because P had not terminated his agreement with X/Y. DM (Pl) Page 53 of 137

BBF----C(assignment) Burt (Def) No consent by DM to either of the subleases which is against the lease DM (Pl) Burt (Def) Walsh v. Lonsdale equitable lease. Doesn’t matter that DM later refuses to enter into formal lease. Issue: Could the tenant unilaterally terminate the lease, even though there was at that time only an agreement to lease? (Did the landlord have to accept the tenant's notice of surrender?) Holding: No, and since there was no indication that the landlord had accepted the lease, then the landlord could seek damages for the un-expired term Reasoning: - D wrongfully repudiated the lease and P didn't accept the notice of surrender but instead elected to terminate lease while reserving the right to o claim damages for the unexpired term of the lease. - Followed decision of Highway Properties. o When T repudiates, landlord has four options: i. Accept surrender and sue for damages to date of surrender ii. Do nothing, claim for rent when term ends iii. Refuse to accept surrender and tell T that will attempt to re-let, so lease continues and T responsible for rent and deficiency iv. Terminate lease and sue for damages...present value of unpaid future rent for lease period, minus actual rent ....... received - Extends Highway Properties rule because: 1. Action brought on agreement to lease (rather than real lease). 2. Extension of reasonable time in which landlord must accept the tenant's repudiation - notice given 3 months later 3. Allowed it in lease where no specific covenant to carry out business . Ratio: If a tenant wrongfully repudiates a lease OR an offer to lease, then the landlord may be able to terminate the lease, communicate this intention to the tenant within a reasonable period of time and claim damages for the un-expired term Class Notes: - Statement of claim is T’s first indication that LL hasn’t accepted their surrender and is going to rely on 4 th option. - to person standing in the mall, options 2 & 4 look the same – only way T or court can tell them apart is notice - AB CA says “notice” here (which is 3 months after repudiation and in a statement of claim, after re-taking possession) is good enough o Jonnette – if this is ‘good enough’ surrender by operation of law doesn’t exist anymore (option 2) - AB CA says LL can ‘test the market’ (i.e. rent to someone else) and notice need not be contemporaneous - Surrender by law is basically no more o SM 146  T’s abandonment + LL’s re-possession and attempt to re-let does not equal surrender - Extends Highway Properties o Notice need not be contemporaneous o Extends to equitable leases (not just those valid at law) - CANNOT GET REMEDY #4 if LL and T do not have privity of contract o Yes, makes sense b/c it is a contract remedy so should have a contract o Held in Three Road Properties v. Hofco Electronics (1991 BC SC) - Frustration is up in the air to whether or not it applies Page 54 of 137

o But is covered by RTA s, 40  if premises are destroyed then relationship is frustrated and both parties can go their own way o In commercial context, idea is parties allocate the risk and whoever has the risk will be insured for it – no need for court to end the relationship- parties are supposed to have covered it II. THE RULE AGAINST PERPETUITIES -The rule is designed to prevent the dead from reaching out of the grave and controlling their property. -  Essentially common laws attempt to strike a balance b/w the interests of a present generation and the interests of future generations  Usually arise in wills. People try to keep their ppty within the family for as long as possible. There is a natural friction between the interests of the living and the dead. The common law has always insisted upon the alienability of property.  The CL abhors any condition that limits the ability to alienate the ppty. Perpetuities designed to strike a balance between tying up land for a period of time the law can accept with that that the law cannot accept.  The RAP is in full effect accept as it has been modified by the perp. Act o (1) The act says it only applies to instruments taken affect after July 1 1973 o (2) The act modifies the common law RAP BUT it does not replace the RAP. The act states that before you can apply the act against a gift you must make sure the gift is valid under the common law RAP  The first step in any RAP analysis is the see if the gift is valid at the common law if it is then your analysis is done o If it is not valid then you apply the perp. Act o Perp. Act is remedial -To A for life, remainder to A’s first daughter for life… successive life interests. Here you are tying up land until some distant time in the future. But A might not have a daughter – no life in being here therefore is void. Rule in Whitby v. Mitchel : where there is a gift to an unborn person followed by a gift to the child or descendant to that unborn person then the gift to the unborn person is valid but further gifts to the unborn person’s unborn child, the gift is not good. The rule was abolished by the Perpetuities Act. It only applies to interests created before July 1, 1963. -the modern RAP says a contingent interest must vest , if at all, within the perpetuity period. It then says the perpetuity period is lives in being plus 21 years and a period of gestation if required. -the RAP only applies to contingent interests. It does not apply to vested interests. It also tells us that a contingent interest must vest in interest, not in possession. It must vest sometime in the future. What we care about is that it must be capable of vesting in interest within the perpetuity period. -the perpetuity period is HUMAN LIVES. Rule against perpetuities at common law (What is the RAP): 1. a contingent interest must vest, if at all, within the perpetuity period  points to note: contingent  it tells us that RAP only applies to contingent interests and DOES NOT APPLY TO vested interests  Vested interest must meet 2 prong test o (1) interest must be immediately available to take possession upon the termination of prior interest o (2) person must be identifiable or ascertainable o (3) the size of the interest must be fixed or made certain within the perpetuity period  Size is concerned with class gifts, ie “to the grandchildren of A”.  Each criteria must be determined when the grant begins  If any of those 3 are not met then the interest becomes contingent  Must vest if at all means  the rule is concerned with if there is any possibilities that the interest will not vest during the perpetuity period. If the interest vests outside the perpetuity period and there is even a remote possibility that the interest could vest outside the period the gift is void  There is no wait and see rather the RAP must be applied to the facts as those facts exist at the time when the instrument takes effect o i.e. if it is a will you would look at it at the date of the death of the testator o i.e. “To the grand child of A”, A is unmarried, no kids  this gift is void 2. the perpetuity period is “lives in being + 21 yrs + a period of gestation if applicable  lives in being  is the relevant lives in being – all of those beings who are alive when the instrument takes effect  relevant lives are directly or by implication connected to the interest or gift that is vested Page 55 of 137

o anyone whose name is mentioned in the gift is relevant  The secret is looking at the POSSIBILITIES  Perp Act takes a wait and see approach  Keep waiting and seeing until the death of the last life in being  Size of the gift is important when it is a class gift: o A class gift: whereby the size of the share of varies with the number of people in the class:  i.e. 2 kids = each take half  i.e. 4 kids = each take ¼ o Common law tried to develop a mechanism to close a class so as to try and save a void gift  rule in Andrews v. Partington  It is not part of the RAP  It only applies to class gifts  This rule just like the RAP must be applied to the facts as they exist when the instrument takes effect  For this rule to apply there must be a member of the class in existence who can claim his or her share when the instrument takes effect A. Basic Principles 1. The rule is concerned with "possibilities," not probabilities. The rule must be applied when the gift takes effect, from the outset. We must ask when the gift takes effect and what are possibilities in the future such that this gift could vest outside the perpetuity period. There is no “wait and see” whatsoever for the purposes of the rule. - legislative reforms have dealt with possibilities, and the outset.  If there is even the slightest possibility the interest may vest outside the perpetuity period = VOID.  It is the modern common law rule that has gone back centuries to keep property in circulation, since property had so much influence on economies.  Ask questions! See the possibilities! Common law says an 85 yr old woman can have children. (fertile octegenarian) 2. The rule applies only to contingent interests, that is, interests that are subject to condition precedents.  The interest must vest if at all, within the perpetuity period.  The rule is not concerned with vested interests. Therefore the rule is concerned with all legal or equitable interests, real or personal, that are subject to a condition precedent. 3. The commercial purpose of the rule is to keep property interests in circulation for economic purposes. 4. If an interest does not vest within the perpetuity period, the interest is void unless saved by the Perpetuities Act .  In Alberta, the common law Rule Against Perpetuities is still in effect to the extent that it is altered by the Act. Therefore there will be 2 steps in answering a perpetuity problem: 1) Is the interest good or bad under the common law? If bad, 2) Can it be saved by the Perpetuities Act ? 5. The Perpetuities Act is a saving statute that modifies, not abrogates, the common law rule. The main feautures of our act is the provision of “wait and see”. Where it is void at common law the act says where actual events show that the gift must vest then it is good, if actual events show that it won’t vest then unless the gift is saved by other aspects of the statute then it is bad. The act the says which steps to take -the act outlines statutory ages for childbearing. Females are legislated to have children between the ages of 14 and 55 unless actual events have shown a child being born outside these ages. It says that males are capable of having children over age 12. -the wait and see provision says that wait and see what happens and if the gift vests within the period then good, if not then bad. -we wait and see for the perpetuity period (s)5 -s 5 adds another life in being, the unborn widow. NOTE: Before the Rule Against Perpetuities  Rule in Whitby v. Mitchell : A gift to the heirs of persons unborn is void. (Also known as a gift to an ‘issue’ of an unborn).  This is overruled in Alberta by the Perpetuities Act , but not in all other provinces. B. The Common Law Rule Against Perpetuities Page 56 of 137

At common law: (A) A contingent interest must vest, if at all, within the perpetuity period.  Any property interest, real or otherwise, is void from the outset if it can possibly exist outside the perpetuity period.  ‘At the outset’ means you must apply the rule at the time the gift is made. (B) The perpetuity period is "lives in being plus 21 years, plus a period of gestation if applicable." 1. Is the interest contingent or vested?  An interest is vested (with respect to perpetuities) if: (1) The party to take the interest is identified or ascertainable, (2) The interest will take effect immediately upon the determination of a prior interest, and (3) The size of the interest is fixed or ascertainable by the rule in Andrews v. Partington .  The first two points are enough to satisfy vesting in ‘non-perpetuity’ situations. For something to be vested within a perpetuity context, all 3 points must be satisfied.  With respect to point (3) and class gifts, you can often not determine the size of the class and therefore the size of the gift. Therefore, the gift will not be ‘vested’. The Rule in Andrews v. Partington : For the rule to apply there must be a member of the class in existence who has satisfied all the contingencies. -this is a rule of convenience that cannot apply if the testator had a contrary intention. If the intention was for the class to not close, then the rule will not apply.  The common law concession to the harshness of the rule against perpetuities.  With a gift to a class of people, the size of each gift (share) must be fixed during the perpetuity period.  At the time in which the interest takes effect there must be a member of the class at the outset who is entitled to the claim o Interest taking effect = death of testator  If there is a member of the class that has satisfied all of the contingencies then the rule applies to close the class o Only closes the class if the requisites are satisfied (i.e. Grandchild has reached age of 21) Example  But if it is a gift to all the grandchildren of A, we won't know the amount of each share because more grandchildren can always be born. The rule is a class-closing rule allowing the shares to be fixed.  Void if A is alive at the time the interest takes effect.  Good if A is dead at the time the interest takes effect. Note: If an interest is void at common law in Alberta and created after July 1, 1973 we can turn to the PA and apply these provisions to see if the Act can save the gift. The PA does not abrogate and replace the common law rule of perpetuities. We must still determine whether or not the interest is valid at common law. 2. The meaning of "lives in being"  "Lives in being" means in theory all relevant lives in being.  ALL relevant lives in being are those that are; 1. “(Possible) lives in being" (alive at the time the interest is created), and 2. Class of lives in being (see we know who the last person is that dies who will trigger the 21 years) “Relevant lives in being" (include those lives that are directly or indirectly connected to the contingency upon which vesting depends). Eliminate lives in being that are not relevant.  Indirect lives in being can affect when the contingency will be satisfied.  "To the grandchildren of A" – this is a contingent interest. The condition precedent is being born a grandchild of A. - A - C1 - GC1 - GC2 - C2  A, C1, C2, GC1, GC2 are all the relevant lives in being (at time gift is created).  directly connected = A and her grandchildren  indirectly connected = A's children (C1 and C2)  A could have another child which could create a grandchild, which would not be a relevant life in being because they weren’t such at the time the gift was created.  Gestation period can be tacked on before or after the perpetuity period. Page 57 of 137

3. No "wait and see" at common law  Everything depends on possibilities, not probabilities, nor an actual event. Possibilities must be considered at the time the instrument takes effect: inter vivos interest  at the date of the instrument, and will  at the death of the testator or testatrix .  Common law does not "wait and see" whether the gift vests within the perpetuity period according to actual events. The common law presumes people of any age are capable of having children. 4. Class gifts  A gift to all who come within some description with the property divisible in shares varying according to the number of persons in the class.  The share of all members of the class must vest within the perpetuity period; if not, the whole gift fails.  The exception to the above is the rule in Andrews v. Partington.  Rule in Andrews v. Partington states: - Once the instrument takes effect, as a matter of convenience, a numerically uncertain class of beneficiaries closes when the first member of the class becomes entitled to his or her share . - ALL members of the class in existence at the time of closing are included to the exclusion of members of the class born after closing. - Closing the class fixes the size of each member's share. - As a rule of convenience, this rule cannot close the class where it is contrary to the donor's intention (e.g. in the case of a life tenancy)  Where you have a class gift following a life estate, Andrews v. Partington may or may not apply, depending on the facts.  If there are no members of a class at the outset, the gift is void. It is not a wait-and-see rule. NOTES: In exams, identify lives in being. 5. Miscellaneous Matters  Common law does not recognize illegitimate children or adopted children. Unborn widow - ‘To A for life, remainder to A’s widow for life, remainder to A’s grandchildren. - Whenever you have a gift to an unmarried person, then that person’s spouse will not be recognized in common law as a life in being. Because (that new person may not have been around when gift was made) Fertile Octogenarian - a woman of any age can have kids (i.e. 90) Precocious Toddler - a woman or man of 2 can have kids at CL (any age) Royal Lives Clause - This clause is used to maximize the time that property can be tied up. - Says that the gift must vest, if at all, within 21 years of the death of the last living descendent of Queen Elizabeth II living at the time the instrument takes effect. - Since there are sufficient genealogical records of the royal family, it is easy to identify the "lives in being" under such a clause. - The “now living” portion of a Royal Lives clause is very important. - Often used at standard boilerplate in oil and gas agreements. To the GC of A.  Class gift – any gift whereby the beneficiaries of the gift must meet some description and the number of potential beneficiaries can vary.  A is alive and has no grandkids. Must first determine the pp: o ID the lives in being: A, any children (C1, C2,) o Possibilities: A could have another child who is not a life in being. And this child could have a child (a grandchild) 21 years after the death of the last life in being.  A is alive and has two grandchildren. o Lives in being: C1, C2, GC1, GC2 o Possibilities: C3 could be born and all other lives in being die and C3 produces a GC more than 21 years after the death of the lives in being. Page 58 of 137

o Andrews saves this gift because where there is a class gift and when that gift takes effect (at the outset) there is a member of the class who has met all of the conditions for contingencies to claim their share in possession then the class will close at that time so as to include all members of the class in existence when the class closes. o Because there were two children alive and able to accept the gift (take the share in possession), the class closes and only those alive at the time are included in the class. ALL future members of the class are excluded. It fixes the share of each member of the class by excluding any other members in the class.  Note: the rule is not a rule of law and not a principle that developed as part of the rule against pertetuities. The rule in Andrews is a rule of convenience only. If in the creation of the gift there is an intention shown that the class is not to close simply because there is a member entitled to claim their share in possession then Andrews cannot apply. The alternative would be to postpone possession or close the class as a matter of convenience and to put the ppty in economic circulation. To A for life, remainder to A’s GC. A is alive and has C1, C2, and GC1, GC2  Lives in being: see all above  Possibility: all die and A has another child and gc.  If no GC are alive then the remainder gift is void because Andrews does not apply and a child could be born more than 21 years after the last life in being dies. Remainder gift is void. The dead should be able to preserve ppty for the next generation plus a majority of 21. PA -s 18 deals with commercial matters and prescribes a strict 80 year period. -s 19 prescribes 40 year periods for possibilities of reverter and rights of re-entry -s 4 implements the wait and see concept -s 5 establishes the relevant lives in being. -the determinant subsection is in s 5 (1) that provides that all lives in being that come within ss 2 only count if the are in being and ascertainable at the outset -the exception is found in s 5 (2)(e), which includes the unborn widow as a life in being even if they are not in being or ascertainable at the start of the term. Examples: First ask: -who are the relevant lives in being? NB: To solve these questions on an exam you must first: 1) Reduce to the format “To A, remainder to….” or whatever is appropriate. 2) Ask if the interest is contingent? Or vested? 3) If contingent (there is a possibility that the event will happen), figure out who are the relevant lives in being at the outset.  To A’s GC at 21  suppose that A is alive at the date of the gift but no GC of age:  the only relevant life in being is A, we don’t have any idea if she has children. Suppose A gets married and has 3 kids C1,C2 and C3. BUT COMMON LAW DOES NOT WAIT AND SEE it just looks a possibilities. Not one of the GC would be 21 and the gift would vest outside the period  Is the example saved by the act?  We use the wait and see provision and wait to see if A has kids and then her kids have GC’s.  We look at the age of A and see if it is under 55  To the 1 st daughter of A who may marry. A has 2 daughters at time of the gift:  (a) suppose A is alive:  Lives in being are A, D1 and D2  this is not good at CL b/c A could have D3 and A, D1 and D2 could die then D3 would be left but she is not a relevant life in being thus the gift fails\  Can it be saved by the Act:  Only way it could be saved is by after waiting and seeing is to re-write under section 8. Ian says the only way to re-write it is to say “to D3 if she marries within 21 years” and you would re-write after the death of the last life inbeing (which is D2)  (b) suppose A is dead: Page 59 of 137

 To A (a bachelor) for life, remainder to his widow for life, remainder to the eldest of his brothers living at the widow’s death:  (a) suppose A’s parents are alive  Lives in being are A, A’s parents, A’s brothers  What are the possibilities: (1) Parents could have another son, (2) A could marry a woman that was not alive when the gift was received, CLASSIC EXAMPLE OF THE UNBORN WIDOW RULE  What makes this bad is the unborn widow possibility, and the ability of A’s parents to have another brother who could be the eldest after the perpetuity period  (*) can it be saved by the Act?  Unborn widow rule  cannot count the widow as a relevant life in being  S.5(2E) saves this gift from being void b/c it makes the unborn widow a relevant life in being  (b) A’s parents are dead  It is good b/c all of the brothers are already lives in being  (*) can it be saved by the Act:  To A if the minerals under blackacre should be worked  What we have here is the problem of identifying the lives in being  The only life in being we have is A  Can we at common law count a as a relevant life in being?  This is a situation where at common law we cannot say that A is attached to the gift. For that reason because we cannot determine the relevant life in being the period becomes a straight 21 years.  It is bad at common law b/c it is clear that the minerals could get worked after the 21 year period  (*) Under the Act:  Wait and see  Under the act A is a relevant life in being under s.5 clause 2 of the act (beneficiary)  Under the act the relevant period is the life of A plus 21 years so we have to wait and see if they are worked in that period. If they are not worked in that period it is void. Can it be saved by other provisions? NO!!! What would need to be do is to say that the interest was created in a contract and then it would be saved by s. 18  To the first of my daughters to marry after my death (consider the consequence of this limitation if it were in the mother’s will, or alternatively, in an inter vivos deed)  Lives in being: Any daughters, Mom is dead so she does not count  It is good b/c there is not the chance of a non-life inbeing marrying outside the perpetuity period  If this was an inter vivos trust (mom still alive) it would be void  the act may save it (1) look at the capacity of the ability to have children [s.9] if she is over 55 then mom can’t get knocked up, (2) wait and see for the perpetuity period for actual events like  mom dying which would make gift good b/c it was now certain  Inter vivos trust makes the gift void b/c mom could have another daughter (lets call her D4) and then the other daughters and mom could die leaving D4 and then she would be married outside the 21 year perpetuity period.  To the grandchildren of A at 21 (no GC born yet)  (a) A is still alive  At common law the lives in being are A and the kids. It is void b/c A could have another Child which would be a non life in being, and the grandchildren could be produced more than 21 years after the death of the last life in being.  THE ACT SAVES BY:  Capacity to have children, then we wait and see (if A dies then we know the gift is good b/c there is no way there can be another child born by A), if waiting and seeing does not work then s.6 will not work b/c we cannot lower the age to less then 21, we could go the class splitting section of the act, that may help  (b) A’s is dead  It is good b/c no chance of 3 rd kid  A grants to B the right to acquire a 50% interest in the Blackacre mineral lease  First we have to look at the nature of the interest  it is an OPTION (the legal definition of an option is where an optionee can compel the owner to sell what is granted in the demise)  As an option it is a future interest (B may exercise the option any time in the future)  It would be void at CL b/c it could vest in B’s estate more than 21 years after the death of B ( B is the relevant life in being, because it is B who exercises the option)  THE ACT DEALS WITH THIS:  S. 17 is about options “the rule against perpetuities does not apply to a reversionary interest of a lease of real or personal property” Page 60 of 137

 Have to ask is it a lease hold interest or a profit a prendre interest  if it is a profit a prendre interest then section 17 does not apply  To A for life and after her death to be equally divided b/w all her children who shall attain the age of 25  (a) A is dead at the time of the gift  At CL it is good b/c there is no possibilities of extra kids after she croaks  What if there is one child who is of age 1?  Does not matter because they are all lives in being  (b) A is still alive, but does not yet have any children who have reached 25  At common law it is void b/c A is alive and could still have another child and the others could die and if the last child was under 4 years old they would take outside the perpetuity period  ACT DEALS WITH IT:  Capacity to have kids, wait and see,  (c) A is still alive but the prescribed age is 21, and no child has yet reached the age of 21  At common law it is good b/c any child would turn 21, 21 years after the death of A  A devise by T “to all A’s Grand children”  (a) A is living at T’s death and has one grandchild  Lives in being are A, A’s kids, A’s grandchild. It is a class gift and is dealt with through the rule in Andrews v. Partington. The rule only applies if there is a member of the class to which the gift applies. Here there is a member of that class and it would close the class to include the one GC and EXCLUDE other GC”s  The gift is bad at CL but is saved by the rule in Andrews v Partington  To use Andrews v Partington the beneficiary must be alive, and must be able to claim the gift. The class will then close.  (b) A is living at T’s death, but no grandchild  Has to be bad at common law  Andrews v. Partington does not save it b/c there is no member of the class to who the gift is made for.  A devise by T to A for life, remainder to all the grandchildren of B who attain the age of 11 in equal shares. (B is living at T’s death)  (a) there are 3 Gc’s alive at the time of the gift and one of them is 12  Void at CL. Since B is alive then it is possible that another child could be produced who could produce a grandchild who would turn 11 outside the perp period.  Saved by Andrews v Partington as one child is 12 at the death of the testator. A v P closes the class. Av P can apply to any class gift but only applies if when the gift takes effect there is a member of the class who has satisfied the contingencies and is able to take possession.  (b) There are 3 GC’s alive at the time of the gift 4, 7, 9. When A dies, one GC has already turned 11  Void at CL for the same reasons as above. It is not saved by A v P because the gift takes effect at the death of T, when the ages are 4, 7, 9. No one has reached the age of 11. The fact that A dies when a GC is 12 is not relevant.   To the 1 st son of A who may marry. (A is a woman, has one son, and is 56)  Void t CL  Saved by the capacity to have children in the act   To the 1 st daughter of A to reach 23 (A is still alive)  Void at CL. Possible that a no LIB is produced who does not turn 23 within 21 yeas of the last LIB dying.  saved by capacity to have children  if A dies when D3 is 2, then it will vest in D3 when they are 23 so it is good. A is still alive, male, and one of the children is already married?  Saved by A v P. A is still alive, male, but no children are married  Void at CL To A for life, remainder to the GC of A. Page 61 of 137

 Inter vivos: gc1, gc2, c are relevant lives in being. Is there any possibility that a gc could be born at a time after the perpetuity period has expired? Yes, if A is alive it is possible that after the execution of the instrument A has another child and everyone else dies and this child has a child more than 21 years later.  If A is not alive – it will be good. To A for life, remainder to A’s eldest son.  Can be interpreted two ways: o If upon birth then within the perpetuity period. Vested To A for life, remainder to A’s eldest son at A’s death.  Contingent.  Lives in being: a, es, and any other son  The oldest son alive at the time of death gets the goods.  Good. To my first daughter who marries after my death  Inter vivos trust – same analysis o Lives in being: d1, d2, d3, creator of the trust (grantor) o Is there a possibility that the daughter to marry after the death of the grantor after 21 years? If the grantor has a fourth child and all other children die she could wait more than 21 years after the death of the grantor to marry. Therefore, gift fails.  By will o Good at cl. o At the death of the grantor, the grantor cannot be a life in being (can’t produce any other daughters), therefore only the daughters alive are lives in being and they will marry within their lives (therefore within a life in being). To A for life, remainder to A’s widow for life, remainder to A’s oldest sister living at the widow’s death.  In this case, A is not married!  By will o At death – A is alive, but A marries someone who is not a life in being, there are 3 sisters. o Gift is void. To A for life, remainder to B.  Good gift – is vested, identifiable, ascertained, fixed size. To A for life, remainder to B’s children at 21.  Lives in being = A, B, and B’s children if already born (C1 & C2).  B could have more children. But even if all the lives in being died, those later born children must turn 21 within the perpetuity period.  Gift is good. To A for life, remainder to A’s grandchildren at 25.  Void b/c it could vest outside the perpetuity period. To A for life, remainder to A’s grandchildren at 21.  If A is dead, lives in being = C1, C2, GC1, GC2. o Then if the children produce more grandchildren, they will have to turn 21 years old within 21 years of their parents’ death. o Gift is good b/c A is dead and could not produce any more children after the date of the instrument taking effect (which could allow the grandchild to turn 21 more than 21 years after the death of the lives in being) To A’s grandchildren at 21 while A is alive.  Void b/c A could have another child that is not a life in being. o But because this is a class gift, the rule in Andrews can be used to close the class. o If at the date that the gift takes effect there is a member of the class who has satisfied all of the contingencies, that class will be closed and any later members will be excluded. To A for life, remainder to the grandchildren of A at 21.  Andrews can be applied if it would not be contrary to the intent of the testator. Page 62 of 137

 If one of the grandchildren is 21 at the date that the instrument takes effect, you can apply the rule immediately to save the gift. But the class cannot be closed until A’s death because it was the intention of the testator to give A a life estate.  If more grandchildren are born after the instrument takes effect, but before A dies, they will be included in the class. To A for life, remainder to B’s children at 25.  This gift is bad (could vest outside perpetuity period) UNLESS one of B’s children is 25 at the time the instrument takes effect. Then the rule in Andrews v. Partington would be applied to close the class upon A’s death. To the first daughter of A who marries.  Gift is bad if A is alive. (Lives in being = A, D1, D2 & D3). What could happen? A could have another daughter (D4) who wouldn’t be a life in being. If A dies and D1, D2 & D3 die unmarried, there is a possibility D4 could marry more than 21 years after the death of the last life in being.  Gift is good if A is dead at the time of the instrument speaking. Lives in being = D1, D2 & D3. Whenever they marry will be within the perpetuity period. To the first daughter of A who marries after A’s death.  Gift is bad if A is alive because A could always have another daughter who may marry outside of the perpetuity period.  But “To the first daughter of A who marries within 21 years of A’s death” will be good because to satisfy the contingency, the daughter will have to marry within the perpetuity period. To A (a bachelor) for life, remainder to his widow for life, remainder to the eldest child of A living at the death of the widow.  Gift is bad  typical unborn widow problem.  Gift to the widow is o k because she may not have been born at the time the instrument takes effect, she will not be a life in being. Therefore, only A will be a life in being.  In that case, the interest must vest within 21 years of A’s death. This may not happen (why not? b/c there may not be any children?), therefore the gift is bad. To my children at 25.  In a will this gift is good because the only lives in being will be the children.  In an inter vivos transaction, the gift is void because the grantor could have more children after the instrument takes effect who would not be lives in being. Advanced Problems: 1. On trust to X for life, remainder to her first and other daughters successively for life. X does not yet have children. - Who gets what and why? - 2 contingencies, X has daughters and they are born. - The gift to X is OK. - The gift to first daughter is good because it must vest within 21 years of the death of mother. - But, the gift to successive daughters must be bad because X does not yet have any children, and therefore no lives in being. - At the time this gift is created, X has no daughters and therefore it would immediately be struck down under common law. - May be a gift that can never be good because it cannot be saved. - Might be able to be saved under ‘wait-and-see’ provisions. 2. To such of A’s grandchildren as shall attain 21. A is alive at the date of the gift, but no grandchildren of age. - Involves identifying ‘implicit’ lives in being. - Clearly bad gift. - No GCs of age  cannot use Andrews v. Partington . - Bad because A is still alive and can still produce C3, who would not be a life in being (not there at time gift created). GC of C3 would not come of age within 21 years of death of last life in being. - Because there is (the slightest) possibility of problem, the gift is struck down from the outset. - If A dies within the wait-and-see period, the gift must vest with one of the GCs. - How can the gift be saved? - You can ‘class-split’ to restrict GC born outside the initial set of lives in being, and save the gift. 3. To the first daughter of A who may marry. A is alive and has no married daughter at the time of the gift. - Lives in being are A and her (2) daughters. Page 63 of 137

- A can still have another daughter who would not be a life in being, and D3 might not marry within the 21 year perpetuity period (within 21 years after the death of the mother), therefore the gift would be void unless saved by cy-pres (cannot age- reduce or class split). 4. To A (a bachelor) for life, remainder to his widow for life, remainder to the eldest of his brothers living at the widow’s death. A’s parents are still alive. - Classic unborn widow problem. - Gift to brother is bad. - Cannot ascertain eldest brother living at widow’s death. - If widow lives more than 21 years after death of last brother, the gift will not vest within the perpetuity period,  bad. 5. To A, if the minerals under Blackacre should be worked. - The gift must vest in A, if at all, within 21 years of A’s death. - Won’t fail rule of perpetuities, but may fail because condition is not fulfiLDed. - Would simply wait-and-see within life of life in being (A). 6. To the first of my daughters to marry after my death (consider the consequences of this limitation if it were in the mother’s will, or alternatively, in an inter vivos deed). - If by will, gift will be good. - If by inter vivos trust, A could produce a third daughter and all the lives in being could die, and D3 could marry more than 21 years after death of last life in being (perpetuity period),  no good. 7. To the grandchildren of A at 21 (no GC yet born). (a) A is still alive; - Similar to #2 above. - Bad because C3 could be born (not a life in being) who could have another GC who could attain 21 beyond 21 years after the death of the last life in being. - Could be saved by ‘wait-and-see’, and then maybe class-split. (b) A is dead; - Has to be good because what makes the gift potentially bad is the possibility of A having more children, which is not possible if A is dead. 8. A grants to B the rights to acquire a 50% interest in the Blackacre mineral lease. - This is covered by s.18 of the Perpetuities Act . - Perpetuity period is 80 years from date contract is formed. - You would wait-and-see for 80 years, but under common law it would be bad. 9. To A for life and after her death to be equally divided between all her children who shall attain the age of 25. A is still alive, but does not yet have any children who have reached 25. - Clearly bad because A is still alive and can have more kids. - Can be saved by wait-and-see, and then age reduction under s.6. 10. A devise by T to all A’s grandchildren. (a) A living at T’s death and has one grandchildren. - A can have another child and grandchild, which would make gift bad. - Can be saved by Andrews v. Partington . (b) A living at T’s death, but no grandchild. - Can’t be save by Andrews v. Partington . - SEE s.7 of PA for this problem. 11. A devise by T to A for life, remainder to all the grandchildren of B who attain the age of 11 in equal shares. B is living at T’s death. (a) There are 3 grandchildren alive at the time of the gift and one of them is 12. - Identify lives in being  A, B, GC1, GC2, GC3 - B could have another child then GC who could turn 11 outside 21 years after the death of the last life in being. - Gift could be saved by Andrews v. Partington . (b) There are 3 grandchildren alive at the time of the gift 4, 7, 9. When A dies, one GC has already turned 11. - Bad because at time of gift there are no members which satisfy the contingencies. Page 64 of 137

12. To the first son of A who may marry. A is a woman with one son, and is 56. - Bad at common law but can be saved by s.9 (she is over age of fertility). - If she does have another child, capacity to have children does not help, and we must ‘wait-and-see’. - A could have 3 sons at time gift is made, then have a 4 th son who is the first to marry but does so outside 21years after the death of the last life in being. 13. To the first daughter of A to reach 23. A is still alive. - Say A has two daughters, has a third after the gift created (not a life in being), all other lives die, may be bad. - Could age reduce. 14. To all of the children of A who marry. (a) A is dead. - No good. (b) A is alive, woman, over 55. - Look to s.9. (c) A is still alive, male, and 1 child is already married. - Bad at common law. - A numerically uncertain class, class gift, use Andrews . (d) A is still alive, male, but no children married. - Bad. - ‘Wait-and-see’ might save. B. The Perpetuities Act  The Act does not abolish the common law rule against perpetuities, it reaffirms it as being full force and effect in Alberta. It is modified by the perpetuities Act. General principles 1. The Act modifies the common law rule. - s. 2. - Here we are required to go through the exercise of looking at whether the gift is good or bad at common law - If it is good then we don’t need to look at the act - You must apply the common law rule. - If valid at common law, end of analysis. - If not, turn to Perpetuities Act if the disposition was made in an instrument taking effect after July 1, 1973. - Trusts take effect upon delivery. “ Inter vivos ” 2. Contingent interests are not void for the mere possibility of vesting beyond the perpetuity period. o s. 3. o Actual events will determine if the interest is good or bad. o No contingent interest in real or personal ppty will violate the rule based on the fact there is a possibility the interest will vest beyond the pp. Rather, we are going to wait and see. 3. You must "wait and see". - s. 4. - Provides saving mechanism for things that would be void at common law - This section incorporates a wait and see mechanism into the rule - There is a presumption of validity until actual events show that it is incapable of vesting outside the perpetuity period or that it must vest within the perpetuity period - Clause (a): If the interest must vest outside the period unless saved by age reduction, class splitting, or cy-pres, then it is void. - Clause (b): If the interest must vest within the period, then it is valid. 4. How long do you "wait and see"? - s. 4. - We will wait and see actual events that occur during the perpetuity period under the act - For the perpetuity period established by the Act. (Until actual events establish the result). Page 65 of 137

- If void at common law because it might vest outside the pp, we will wait and see. We will wait and see until actual events result in the interest vesting outside the pp or until actual events show that this will not happen. Until that time comes the interest in presumed to be valid. Wait the pp – this is exactly the same at cl in terms of lives in being plus 21 years. But s.5 of the Act defines the lives in being. IE. By will: "To my grandchildren at 21." - Lives in being = grandchildren GC1 and GC2 & children of testatrix C1 and C2. - In this case the gift would be good (because testatrix is dead and couldn't have any more children) and therefore the act would not apply. - BUT if it was by inter vivos transfer, the gift would be bad at common law. - Therefore the Act's wait and see approach would be applied to determine if the testatrix actually does have another child who is a life in being and who then turns 21 outside the perpetuity period. - REMEMBER ALWAYS ASK YOURSELF ARE WHO ARE THE RELEVANT LIVES IN BEING AT THE TIME OF THE GIFT 5. How do you establish the perpetuity period? - s. 5(1) requires a person to be within s.5(2) who is "in being and ascertainable at the beginning of the period." - The relevant lives in being are defined in subsection 2, however they must be in being and identifiable at the beginning of the perpetuity period. - If there are no lives in being then the PP is a straight 21 years - Who are persons within ss.5(2)? (if no one, period = 21 years) i. The person making the disposition [5(2)(a)] ii. The beneficiary of the disposition - any member of the class if a class gift [5(2)(b)(i) - a person who must satisfy a condition to take the gift [5(2)(b)(ii)] iii. Parents of beneficiaries or potential beneficiaries [5(2)(c)] iv. Prior interest holders and ‘gift overs’ [5(2)(d)] - Prior interest holders = any beneficiaries like life tenants who take vested interests - ‘Gift overs’ = person to whom the gift will go if the contingency is not met v. The unborn widow(er) [5(2)(e)] - even if she was not in being or ascertainable at the time that the interest takes effect, is a life in being  exception to 5(1). - Potential members of the class are not lives in being since they were not in being and ascertainable at the commencement of the period. - The exception in 5(2) - Where there is an unborn widow even if she/he was not in being at the time commencement of the period she is considered 6. How do you apply the Act? (See s. 11 for the order) i. Determine the capacity to have children  s. 9 - Males able to have children at 14 years and over. - Females able to have children between 12 and 55 years of age. - Evidence can be given to rebut these presumptions - Women over 55 are deemed not to be able to have the capacity to have kids If this doesn't save the gift then: ii. Wait and see - s.4 - Establish the perpetuity period and if actual events prove that the interest must vest within the period then the gift is good. If wait and see doesn’t save the gift look to ss. 6, 7, 8. Section 11 tells you the order in which the remedial sections will apply. Look to ss.9 first. - Where wait and see does not save it we go to section 6,7, and 8 If actual events prove that it must vest outside the period look to other measures: iii. Age reduction - s. 6 - IE. "To the grandchild of A at 30." - Actual events at death of A = GC1 is 10, GC2 is 9, GC3 is 7 and GC4 is 4. Page 66 of 137

- In this case we can reduce the requirement of being 30 years of age to an age that would include the youngest grandchild. - Therefore would reduce age to 25 (4 + 21  age of youngest member of class plus 21 years). - N.B. Age can only be reduced once to included the youngest member. - You can only age reduce once so to include all the beneficiaries. - You can only age reduce to allow a beneficiary or potential beneficiary to become eligible within the perpetuity period. Because of the 21-year mark, 21 years is the minimum you can reduce, and there is no maximum. - When a gift will fail because of an age contingency, then and only then will the age be reduced to the age closest to 21 that will ensure that the gift will vest within the pp. - Does the least violence to the granter of the gift. - Only can reduce the age once. If age doesn't save the gift: iv. Class split - s. 7 - Example  "To the grandchildren of A" - Actual events at the death of A = 3 grandchildren and a living child of A who is not a life in being who could produce another grandchild. - First wait and see and if no other grandchild then gift is ok. - If there is a new grandchild then we would split the class to only include those grandchildren born within the perpetuities period. - (1) where you have a class gift that is also contingent upon reaching a specific age, and where you apply age reduction would allow someone to enter the class which would make it void for remoteness. - (2) general class splitting provision that saves the gift by splitting the class as to include all members of the class at the end of the wait and see time period and excluding all other members at the end of the wait and see period. - If none of these have saved the gift: v. Cy-pres provision / doctrine - s. 8 - The court can reform the disposition to give effect to the donor's intention. - Can only re-write the disposition if it is consistent with the original intention of the donor. - May say; 2 out of 3 provisions were/are satisfied, therefore OK. - No cases in Alberta using this provision. - The court has a limited ability to re-write the disposition so as to save the gift but only within the limits of the rule against perpetuities. - Where s4, 5, 6, and 7 do not save the gift we can re-write the gift if the re-writing will be consistent with the wishes of the donor. 7. Other provisions;  The act can only apply to interests that took effect after July 1, 1973.  Before this time then the PA doesn’t apply and those interests must live or die by the common law rule against perpetuities.  s. 16 o states that a contractual relationship gives you no more rights than you have in a property relationship. o Interests or disposition Inter vivos – void if by transmission to o Must be a disposition created by inter vivos (I grant certain rights and duties to B and these interests are binding my and B’s successors and assigns). If B then transmits (take by transmission when you acquire interests without giving consideration – you take by way of gift. You can take by will, intestate succession,) the 3 rd parties rights are void.  s. 17 states that the rule doesn't apply to option to renew lease and lesee's option to purchase the reversion (if granted) is also NOT subject to this rule o  s. 18 prescribes special perpetuities period for commercial transactions of 80 years. S. 18(3) doesn't apply to a will or inter vivos gift. o The pp is 80 years with a contractual transaction.  S. 19 deals with highly specialized property interests. The rule applies to both conditional and determinable interests giving a 40- year perpetuity period to a possibility of reversion and a right of re-entry. For the purposes of the rap, the rule applies to a possibility fo a reverter and a possibility fo a resulting trust in the same way it applies to a right of re-entry. Period of 40 years. o s. 19 is important for 3 reasons: - Apply the common rule to the possibility of reverter. Page 67 of 137

- Applies a 40-year perpetuity period to possibility of reverter and right of re-entry. - It is the one example where an interest that would have been good under the common law can be void under the Act. - 40 years starts at the outset. Wait the 40 years to see if the reverter has operated then s.19 says the possibility of reverter is void and the gift becomes absolute. - But at cl the rule never applied to a determinable fee simple. Maybe only the other sections apply to wills and inter vivos transactions that are void at cl. Example under s. 19;  "To A for so long as the Reform Party does not form the government of Canada."  Creates a determinable fee simple with a possibility of reverter.  Under the common law, perpetuities wouldn't apply (therefore it would be good).  But under the Act, the possibility of reverter must operate within 40 years. If not the possibility of reverter will be struck down and the gift will become absolute. CO-OWNERSHIP At common law, there are two kinds of co-ownership 1. joint tenancy 2. tenancy in common -co-parcenary and tenancy by the entireties have been abolished by statute Characteristics of joint tenancy include: The four unities: 1. possession 2. interest – each joint tenant has an equal and undivided interest in the whole 3. title – each joit tenant acquired their interest at the same time 4. time – each joint tenant acquired their interest by virtue of the same title And the right of survivorship -There is a presumption at common law for the creation of a joint tenancy -there is a presumption at equity for the creation of a tenancy in common -a joint tenancy can be converted to a tenancy at common by destroying one of the four unities -the only one required to create a tenancy at common is the unity of possession -for a joint tenancy you need all 4 -because each joint tenant has an equal right to possession of the whole then if a co-owner excludes any of the other co-owners, then they can bring an action in trespass. -where one co-owner excludes another then the one that has been excluded can bring an action for an account against the excluder, which means that the excluder may be required to pay an occupation rent. Severance: -most common way is when the words used to create the o-ownership has used words indicating that the joint tenants are not to have interests that are not intended to be equal and undivided. Ie the words equal shares indicate that each has 50% interest rather than an undivided interest in the whole. The grant is divided so it is then a tenancy in common. -to create a joint tenancy the best way is to say to “A and B as joint tenants”. Indicate joint tenancy Survivorship -where one dies the rights of the person who dies disappear and their rights are subsumed by the survivor. -theoretically the last survivor would have ultimate ownership. This only applies to a joint tenancy, not to a tenancy at common -if something is done during the lifetime to alter the joint tenancy, then it becomes a tenancy at will Act of severance -if there has been an act of severance when there are multiple joint tenants, then only the one severing becomes a tenant in common, and the others are still joint tenants Williams v. Hensman Three ways to sever a joint tenancy 1. A joint tenant may dispose of his interest in the joint tenancy Page 68 of 137

A and B are JT C and B are tenants in common as there is no unity of time, title and interest | | Sells to C 2. All joint tenants mutually agree to be tenants in common. 3. As a result of the conduct of the tenants it can be implied or inferred that they consider themselves to be tenants in common. *the resulting destruction of joint tenancy also destroys the right of survivorship Sorenson v. Sorenson Class: -1. Lease for life 2. charge/ mortgage 3. declaration of trust 4. executed transfers 5. will 6. partition 7. Donatio mortis causa -immediately on her death Mr S registered a Caveat on all three properties -the traditional view of severance is to look at the transaction hat effects the JT share and assess the impact on the four unties. 1. the effect of the lease for years is to sever the JT, but a lease for life does not. Whether a lease severs is related to who is entitled to possession -had Mr S granted a lease for two year term and the lessee dies then the estate is entitled to the remaining term. This severs the right of survivorship -an essential feature is the right of survivorship -a lease for life does not sever s it reverts to the lessor on the lessees death, thus not interfering with possession or the right of survivorship 2. in Alberta the charge is not a conveyance -when a charge is put on land a better question is not whether the charge is an act of severance, but is it a potential act of severance if the person to whom the charge is given enforces it. It does not becoming severing until the creditor forecloses on the mortgage 3. declaration of trust -severs a JT because it is one of the four forms of gift -this creates a situation where a severance has happened off the record, meaning that a title search ould still show that they are JT, and not as TIC 4. Executed transfer -s 65 of the LTA enacted to prevent severance of JT off the record -this section does not accomplish its goals 5. Gift by will does not sever 6. Partition and sale: -she died before the application came before the court so as a result it is not an act of severance 7.Sen v Hedley makes a donatio mortis causa possible LAND TITLES A. Goals and History of Land Titles System  By registering those estates in interests they are protected under the system  It is a system designed to achieve 5 different goals: a. Reliability b. Simplicity c. Cheapness d. Speed e. Suitability  Goals are advanced in court decisions. Page 69 of 137

Reliability: System of evidencing title to land is reliable, which is best demonstrated by comparing them to the deed system and the registry system. A. Deed system – risky,  Evidencing title to land at common law is a system where a transaction affecting a parcel of land is contemplated the vendor was under a duty and obligation to provide to the purchaser an abstract of title setting out all legal docs and instruments that could affect the title to the ppty. Such as every deed executed in relation to the land, copy of the will (if land transferred by will), mortgage papers pledging land for security in a load, leasehold docs. The purchaser was then under an obligation to examine every doc in a chain of title all the law to the original grant from the Crown (judge may find that the purchaser did not adequately search for defects). The purchaser would then decide if each doc was valid as a matter of substance and form. The risk of accepting a venders title under a deed system is always on a purchaser. If satisfied there was a marketable title, would complete the transaction. Under a deed system, problems could occur if all docs are destroyed in a fire (title can’t be made out in that situation). Here, a purchaser would have to take a calculated risk that the vender has a marketable title. The vendor may in good faith produce all docs and then a third party may come forward to say that he has a better title to the land, such a valid claim would defeat the vender’s title and the third party could eject the purchaser from ownership of the land.  Caveat emptor: There was a duty on the purchaser to search the vendors title. The risk of a faulty or defective title was on the purchaser therefore they must examine all documents relating to that parcel of land until they get a good root of title (Full fee simple, both legal and equitable). Then re-searches back up the chain of documents.  Starts with the most recent document and then examines all deeds in reverse chronological order.  There is a risk of undisclosed interests.  Doctrine of Notice  purchaser was bound by any equitable interest on the land if they had notice. Notice could be given either constructively or be given notice actually  (Deed system) Registry System  Provision that says only those docs registered can affect title to land can be binding on the purchaser of ppty. Still exist in Atlantic provinces and Ontario. Atlantic provinces have registry and land titles system. In Ontario they’re transferring from registry to land titles system. In Atlantic provinces the registry system is most dominant and their transfer to land titles is behind that of Ontario. Prairie provinces, Territories and BC have the land titles system. In BC there are small pockets of land with a registry system.  Dealt with some of the problems of the deed system by setting up government offices where all deeds and documents would be deposited for inspection  In this system you would examine every document in the system in reverse chronological order to find a “good root of title”  good root of title has to be at least 40 years old and showed FSAP. After finding that document you would go up and look at every document and make sure each document is procedurally valid  Land Titles System (AKA Torrens)  Where the records of the LT office show that the vendor is registered having an estate in Fee Simple then the state will guarantee that they have title against the whole world a. Can rely on existing certificate of title of the registered owner and you will not be bound by any claim or interest that is not reflected by the title certificate b. State guarantees the existing certificate of title. Reliability: System of evidencing title to land is reliable, which is best demonstrated by comparing them to the deed system and the registry system. Principle of indefeaseable title:  Mirror principle: the existing certificate of title presents an accurate reflection of every interest claimed in that parcel of land. The certificate is a title of all interests’ claims re: that parcel of land. o Allows for reliance on the title.  Curtain principle: a person contemplating dealing with the registered owner can rely on the existing certificate of title and does not have to go behind it to discover all interests not reflected on the mirror of the existing certificate of title.  The curtain blocks out any unregistered interest. The doctrines that attract indefeasibility are: -transfers -mortgages -restrictive covenant -easements -Leases over three years To protect an interest in land you can file a caveat. Page 70 of 137

 The effect of indefeasible title: o Person wanting to buy land can economically obtain all information needed Exceptions to indefeasible title 1. where there is two certificates issued for the same property 2. fraud – fraudsters don’t get indefeasible title 3. mis-description 2. SIMPLICITY -not in the sense that you can handle it without legal training -achieved simplicity to some extent 3. Cheapness: -intent was to eliminate the need for a solicitor -registry fees pay salaries 4. Speed -a transaction should be completed in a day or less 5. Suitability  A person contemplating dealing with the registered owner of a parcel of land can rely with confidence that the person registered under the land titles system can rely on this fact that this title is good against the world. ALL land registered at the LTO there is one existing certificate of title that states the name of the registered owner and any other interests in that land that are claimed by others. Reliability under a LTS means that anyone thinking about dealing with a registered owner can go to the registry office and get a copy of the existing certificate for title for that parcel of land. When you register a transfer it will cancel the previous owners title and the purchaser’s title will be clear of all other interests in the land. Because of the reliability goal it is essential that every single parcel of land must be accurately described and registered at the land titles office. 1. Alberta is divided into two sections, with one office in each district. Land is registered in accordance with its legal description. Land is surveyed into sections and townships based on meridians. There are three meridians dissecting the province. The fourth meridian is the border b/t AB and SK. Each township is divided into sections. Each section is one square mile, and then divided into a quarter sections (160 acres). Each parcel before being subdivided had a legal description that consisted of a system number, township number (horizontal columns), range number (vertical columns), meridian number. (S-T-R-M) (SW ¼ - 12 – 18 – W4 th ) 2. Urban lands have a lot number and a block number and a subdivision plan number within all lands. ALL rural lands have the S-T- R-M legal description. 3. Then by filling out a form at the LTO you can get a certificate of title and see all interests in relation to that parcel of land. This is reliable! In the LTS the state guarantees the title of the registered owner of all parcels of land registered under the land titles system. 4. There are problems with our system as demonstrated in Turta where Registrar screwed up everything that they touched but still more reliable than deed system Essential Features of a Torrens System : State registration of titles to land - The State, with certain exceptions, guarantees the title to the land. - The State guarantees that the person named on the existing certificate of title owns whatever estate or interest on that certificate of title. Necessity of Registration - ALL interests must be registered or protected by way of caveat. - Registration takes place in one of two ways: 1) the act of registration itself, or 3) the filing of a caveat. - Only certain transactions in land can be registered. Only transactions that can result in a cancellation of an existing certificate of title and the issuing a new certificate of title can be registered. Page 71 of 137

e.g. sale, mortgage, lease for more than 3yrs, restrictive covenants - Land titles system recognises every single type of interest --- a non-registerable interest is protected by way of caveat. - If protected by way of caveat the State makes no guarantee with respect to the validity of the caveat or the interest being claimed. - The act of registration will cure whatever defect there may be in that interest. Current Certificate of Title - Mirror Principle : Certificate of title is a complete and accurate reflection of all interests claimed or asserted with respect to that parcel of land. - Curtain Principle : No need to go behind that certificate of title to find unregistered interests. - Those two principles combine in order to create indefeasible title . - Bona fide transferee and mortgagees for value will receive indefeasible title . Exception to this is fraud (but s. 195 of the Land Titles Act abolishes equitable fraud). Assurance Fund - Compensation for losses caused by registrar error or error in operation of the land titles system. Units of Property - the Registrar - Surveys and descriptions The system of land titles: - Identifies which parties can assert indefeasible title. - Intended to rectify most problems created by common law and equity with respect to competing interests in land. Distinguishing Between Competing Interests/Disputes to the Title of the Land :  First in time is First in line o Common law recognition of first come first serve o There are exceptions to this rule  Four factual scenarios’ where competing interests may arise: o (1) 1 st interest is Legal / 2 nd interest is Legal  General principal of first in time is first in right will apply o (2) 1 st Interest is Equitable / 2 nd is Legal  In this situation there is a very important exception to the general principal  The legal interest will prevail if and only if the legal interest was acquired by a bona fide purchaser for value without notice  Concept of notice  it is either actual (on the facts did the party have actual notice – courts construe this very strictly) or constructive (will arise wherever there is notice or knowledge of some interest which would alert the prudent searcher to make reasonable efforts to find out what the interest was)  BFPVWN is a fundamentally import principle, they are referred to as “equities darling”  Have to establish what value is  English courts have ruled that $1 is not valid consideration (Cdn. Courts have not ruled on this matter yet) o (3) 1 st interest is Legal / 2 nd is Equitable  General Principle applies, first in time is first in line  May be some exceptions here  If the 1 st legal interest committed fraud or induced the 2 nd equitable interest o (4) 1 st interest is Equitable / 2 nd is Equitable  Rice v. Rice  Characterize both interests  When did each interest arise, was the interest legal, or equitable  This will only arise if the competing equities are equal. Under the Common Law System (legal vs. equitable interests) - common law decides whether various interests held by others are legal or equitable interests - whether an interest is legal or equitable will determine whether BFP is bound - fraud result (1) legal interests: - must comply with all formalities prescribed by law, therefore one cannot take anything granted to someone else (stat of frauds s. 1,2,3 and Imperial law of property Act (seal) Page 72 of 137