What Counts as “Rent”? Ontario Court Decision Affects Commercial Lease Enforcement
A recent ruling from the Ontario Court of Appeal is sending a clear message to landlords and tenants: just because your lease calls a payment “rent” doesn’t mean the Courts will treat it that way.
This decision has big implications for commercial real estate, especially when it comes to limitation periods—the time you have to take legal action for unpaid amounts.
The Basics: What’s at Stake?
Under Ontario law:
- If a lease payment qualifies as “rent” under the Real Property Limitations Act (RPLA), a landlord has six years to sue.
- If it doesn’t qualify, the shorter two-year limitation under the Limitations Act, 2002 (LA) applies.
In the recent case, Torstar Corporation leased commercial space from Pinnacle International, and was required to pay a portion of any profit from a sublease as “Additional Rent.” When Pinnacle later tried to collect that profit, Torstar argued that the claim was out of time—more than two years had passed.
The Court agreed with Torstar, finding that the obligation to remit profit was not truly “rent” under the RPLA.
Why the Court Said It Wasn’t Rent
Even though the lease called the payment “Additional Rent,” the Court looked at what the payment actually was: a variable profit-sharing amount that included deductions like legal fees and commissions.
The Court relied heavily on comments from Justice Mew in Pickering Square Inc. v. Trillium College Inc.:
“It does not matter whether the parties to the lease define a specific item as being ‘rent’. The obligation must be interpreted in light of the context, scheme, and object of the RPLA.”
He also emphasized that:
- “Rent” must be a regular, periodical sum paid for the use of land.
- The LA should be interpreted broadly, while the RPLA should be read narrowly, as an exception.
What This Means for Landlords and Tenants
This decision narrows the definition of “rent” under Ontario law. As a result:
- Alternative lease structures—like royalty rents, percentage rents, or profit-sharing agreements—may not fall under the six-year RPLA period.
- These types of payments are likely subject to the shorter two-year limitation period under the LA.
So, even if your lease calls a payment “Additional Rent,” you could run out of time to sue in just 24 months.
Takeaway for Landlords
To protect your interests:
- Review lease clauses carefully—especially for variable payments.
- Don’t assume calling something “rent” gives you more time to sue.
- Act quickly—you may only have two years to pursue a claim.
- When in doubt, seek legal advice early.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com