In March, the Quebec Court of Appeal handed down a much-anticipated ruling on commercial leases and landlord obligations. In its judgment, the court clarifies the limits of a landlord’s obligation to provide tenants with peaceful enjoyment of leased premises and explains that the prohibition on changing the form or destination of the leased property is subject to the other provisions of the commercial lease. Such provisions in commercial leases should be reviewed carefully in light of this ruling, especially when one is acting on behalf of a tenant.

Facts

In this case, the tenants are air carriers, i.e. flying schools or companies offering chartered or commercial flights, that have their offices on the grounds of the Saint-Hubert airport. In 2004, the federal government handed over the airport to a company responsible for its promotion and development (“DASH-L”), which has managed, operated and maintained the facility and assumed the landlord’s obligations towards the individual tenants since then.

In response to numerous complaints from area residents who found the noise from the airport excessive, DASH-L set up a committee to analyze the noise situation in the vicinity of the airport. The committee found that the touch-and-go landings conducted by the flying schools were very noisy and harmful because they took place above the surrounding residential neighbourhoods.

The city of Saint-Hubert also assigned someone to study the noise situation in the vicinity of the airport and make recommendations to DASH-L’s board of directors. Based on those recommendations, the board adopted a resolution that had the effect of temporarily restricting touch-and-go landings on one of its runways to certain times of the day.

Quebec Superior Court

The tenants (plaintiffs and later appellants in this case) applied to the Superior Court for a permanent injunction, claiming, among other things, that DASH-L had failed in its obligations as landlord by changing the destination of the leased premises, depriving the tenants of peaceful enjoyment of the leased premises and causing legal disturbances. The plaintiffs argued, in effect, that the resolution of the board of DASH-L [translation] “would prevent the flying schools from properly carrying out their activities, as they would no longer be able to honour their commitments, and would limit the operations of the aviation companies at the risk of harming their reputation, thereby impeding the peaceful enjoyment of the leased premises.”The tenants asserted their rights by relying on Articles 1851, 1854, 1856 and 1858 of the Quebec Civil Code.

The Superior Court judge found that such a restriction on flight times, while admittedly having a potential impact on the tenants’ activities, did not constitute a change in the destination of the immovable during the term of the lease, as claimed by the tenants. A landlord may impose—through regulations or resolutions, for example—limits on the enjoyment of leased premises in a commercial lease.  In the case at hand, as specified in their lease, the tenants were subject to the managerial authority of DASH-L, and DASH-L was within its rights to adopt a resolution reducing flight times and to thereby set limits on the enjoyment of the leased premises. The Superior Court judge therefore pointed out that tenants are required to submit to the landlord’s managerial authority, and such managerial authority [translation] “includes the authority to mitigate noise issues by making decisions that restrict runway access.”2 It is important to note, however, that the Superior Court judge was of the opinion that the injury claimed by the plaintiffs was not established and for the moment remained speculative and merely apprehended.

Quebec Court of Appeal

The tenants appealed the decision to the Quebec Court of Appeal. The Court of Appeal agreed with the trial judge that, while the obligations to provide the tenants with peaceful enjoyment of the leased premises, warrant them against legal disturbances and not change the destination of the leased premises are set out in the Quebec Civil Code, it is permissible to depart from those obligations in a commercial lease. Justice Gascon of the Quebec Court of Appeal cites another decision to that effect from that same court, Karrum Realties Inc. c. Ama Investments Inc. [translation]: “It is important to recall here that Articles 1854, 1858, 1859, 1861, 1863 C.C.Q., which govern the landlord’s obligation to provide the tenant with peaceful enjoyment of the leased premises, are not public order obligations: the parties to a commercial lease can therefore, as they have freely done in this case, limit, even in a draconian way, the landlord’s obligations (…).”3 Since each lease with the appellants specifies that the right to peaceful enjoyment is given subject to rules and regulations established by the landlord for the management and operation of the Saint-Hubert airport, the Court of Appeal also determined that DASH-L could restrict runway access during certain times, even if it might have a negative impact on the tenants. The Court of Appeal added that the injury claimed by the appellants was not supported by any financial or statistical evidence.

Conclusions to bear in mind

When negotiating a commercial lease, the tenant should pay close attention to the way the peaceful enjoyment of the leased premises provision is worded. The use of terms such as “subject to the management authority of the landlord” or “subject to rules and regulations that may be established by the landlord” means, quite simply, that the landlord may restrict, significantly even, the purpose for which the leased premises are used by the tenant.