In North Elgin Centre Inc. v. McDonald’s Restaurants of Canada Limited (2017), 87 R.P.R. (5th) 303 (Ont. SCJ) reversed (2018), 87 R.P.R. (5th) (315) (C.A.) the Court was faced with a landlord who, after not insisting on enforcing its rights strictly, decided to do so--unsuccessfully in the unanimous opinion of the Court of Appeal.

McDonald’s exercised its right of renewal in a timely way on February 29, 2016 for an initial term which expired on March 10, 2017. However, the renewal provision had an unusual requirement--if the parties hadn’t agreed on the rent for the renewal term at least nine months prior to the expiration of the term, McDonald’s could either revoke its exercise of the renewal or elect arbitration. The landlord hadn’t even put a proposal for rent on the table when the nine month date occurred. The parties finally met on August 29, 2016 to discuss the proposal. On August 31, 2016 the landlord sent an email to McDonald’s assuming that McDonald’s intended to let the lease expire after the initial term.

The trial court held that while the landlord had waived strict compliance with the renewal provision (and, in particular, the required election by McDonald’s nine months prior to expiry of the term), it was entitled to change its mind and had revoked the waiver by the August 31 email.

The Court of Appeal made clear that while a party can change its mind and revoke a waiver:

  1. the party must provide reasonable notice of the revocation expressly stating that the party will be insisting on the strict enforcement of its rights; and
  2. the notice must afford the other party a chance to cure any defect resulting from reliance on the waiver.

The landlord’s notice failed both requirements. It wasn’t reasonable notice and it was not a clear revocation. More importantly, it did not give McDonald’s an opportunity to elect arbitration. The Court held that the renewal was validly exercised and referred the determination of fair market rent to arbitration.

So yes, you can change your mind but you have to be clear, fair and reasonable about it.