Co-​​Tenancy Agreement Ontario

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Robert Eisen­berg: That‘s why a good co-​​location clause has what the Biz calls the Sunset clause. And it actu­ally means that if the failure of the ten­ancy agree­ment is not cured at some point, the tenant must make a deci­sion. You must either resign and leave, or return to pay full rent and reopen. The idea is that the appear­ance, either this loss of rental housing causes suf­fering for the tenant, they suffer from the loss of lost turnover, in this case, look, it does not work. You can stop. Or yes, there is a tenant error, but it actu­ally has no effect or sig­nif­i­cant impact on the tenant as long as they are happy enough to stay. You have nothing against the sit­u­a­tion, even with the rental con­tract. “It may be an informal sit­u­a­tion, but at the end of the day, when you sign a con­tract with an owner, you have an agree­ment with them, and now you are respon­sible for that agree­ment.” Robert Eisen­berg: Let me start with the ten­ants, because I think it‘s a little more obvious. Co-​​tenancies are most useful in two main con­texts. The first is for a new devel­op­ment or a new shop­ping centre. And with the co-​​tenancies here make sure you are the tenant are not the first or only tenant who stays here. Sup­pose the owner has trouble renting other parts of the centre, or they decide they don‘t want to build as much as they did orig­i­nally. We are now seeing a lot of them, where con­struc­tion costs have become very high.

The owners decide, “Maybe I don‘t want to build as much as I thought at first” or other ten­ants say, “Maybe we‘re not eco­nom­i­cally able to open our stores.” So, if you have a rental clause in your rental agree­ment, you don‘t need to open and be the only open tenant in a devel­op­ment where no one attracts other traffic. Maybe it‘s not as big or as much of a goal as you thought. In these sit­u­a­tions, we usu­ally see co-​​tenancies of open­ness, because if everyone is open, the idea is that now everyone is open, the risk is more min­imal for me. Robert Eisen­berg: So you can, in a way, think twice in your devel­op­ment, and I have done it per­son­ally, that is where we have ten­ants who come to ask for co-​​location clauses, but we have an anchor that is not required to work all the time, but that has an oblig­a­tion to open for a day. Instead of saying, “It‘s open,” I say, “This tenant is open to stores.” So there are little tricks and little ways around that, but at the end of the day, it‘s about the dis­tri­b­u­tion of risk between the land­lord and the tenant. Robert Eisen­berg: But there are other more cre­ative reme­dies you can have. And again, any­thing under the sun that you can imagine could be a co-​​tenancy remedy. One of the ones I‘ve seen is where a tenant works below a fixed min­imum wage, they say, “Look, if there‘s a lease, you and I will share the risk here, owner.

I won‘t pay my fixed min­imum rent any­more. Instead, I will only pay you a per­centage of rent. They will there­fore receive a per­centage of my turnover. The idea of being there, look, there is a tenant error. I guess there will be a decrease in traffic to the center. There will be a drop in my sales, so I will only pay you a per­centage of what I actu­ally sell. You will not have a guar­an­teed rent. We‘ll share the wounded together. Robert Eisen­berg: So that‘s my second piece of advice.

My third advice is to be clear about the sched­ules. The first sub-​​point is that of healing periods. If a lease default occurs, the ten­ants of course want their rights to apply as quickly as pos­sible, but a land­lord says, “No, no, no, no.

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