A commercial lease signed in 1978 generated a $1.36 million judgment, a $690,000 costs award, and a trip to the Court of Appeal nearly five decades later. In Metro Ontario Real Estate Limited v. Hillmond Investments Ltd., 2026 ONCA 370, the Court of Appeal dismissed a landlord’s appeal from a trial judgment that had resolved three long-running disputes entirely in favour of the tenant. For lawyers who draft and negotiate commercial leases but rarely see the inside of a courtroom, the decision is a vivid reminder that the words chosen at the drafting table, and the paper trail the parties create afterwards, will ultimately decide these fights.
The Background
Metro operated a Food Basics grocery store as the anchor tenant of Hillmond’s Mississauga shopping plaza from 1978 to 2023, under a 20-year lease renewed five times. Three disputes went to trial. The first was who bore responsibility for replacing a failed 30-year-old roof. The second was how percentage rent was to be calculated during the renewal periods from 2003 to 2023. The third was whether the landlord had overcharged common area maintenance (CAM) costs. The trial judge found for the tenant on all three claims and awarded damages of $1,359,799.88. The Court of Appeal found no basis to interfere.
The Roof: Repair Versus Replacement
Section 9 of the lease made the tenant responsible for maintaining the interior of the premises. Section 10 required the landlord to make “all needed repairs and replacements to and of … the exterior of the leased premises including the exterior walls, roof, canopies, skylights, foundations and bearing structure.” The landlord argued that its obligation extended only to repairs caused by “land subsidence and structural defects or weaknesses,” the introductory words of s. 10. The Court of Appeal rejected that reading as tortured and commercially absurd. Section 10 imposed two distinct obligations, and the second expressly covered replacement of the roof.
Worse for the landlord, it had acknowledged in writing in November 2008 that the roof needed complete replacement, then reversed its position once a dispute over rent erupted in 2009. The trial judge found the landlord’s resistance was driven by a desire to pressure the tenant in the rent dispute, not by any good faith assessment of the roof’s condition. Having refused its obligation, the landlord left the tenant entitled to replace the roof itself and charge the cost back under the lease’s self-help clause.
Percentage Rent on Renewal
The lease set additional rent at 1.25% of annual sales exceeding $10 million. Section 38, the clause governing renewals, recalculated that threshold during renewal terms as the greater of the average annual sales in the three preceding fiscal years or $10 million.
The landlord contended that s. 38 created a new layer of “premium rent” payable on top of the original formula. Both courts disagreed. The language was unambiguous, s. 38 modified the calculation, and the tenant had overpaid every year of every renewal period. The tenant recovered the overpayments made within two years before suit as unjust enrichment. Notably, the court held the limitation period ran from each retention of an overpayment by the landlord, not from 1999 when the tenant’s own calculation error first became discoverable.
One more point closed the issue. The landlord pointed out that the tenant had, for years, actually paid rent the landlord’s way, and argued that this showed how both sides understood the clause. But that kind of evidence, how the parties behaved after signing, only comes into play when the contract’s wording is genuinely unclear. Here it wasn’t. Because the lease language was unambiguous, evidence that the tenant had for years paid rent on the landlord’s interpretation was inadmissible. Citing Shewchuk, the court confirmed it would have been a legal error to consider subsequent conduct absent ambiguity.
CAM Charges and a Self-Serving Limitation Theory
The trial judge found the landlord knowingly inflated CAM invoices by including cleaning costs for a passport office that was not a common area, artificially shrinking the plaza’s gross leasable area to increase the tenant’s proportionate share, and charging an unrecoverable management fee. The landlord’s own counterclaim for allegedly underpaid CAM charges for 2009 to 2011 was statute-barred under the six-year limitation period in s. 17(1) of the Real Property Limitations Act. The landlord argued the clock only started in 2013 when it finally issued the invoices. The court refused to let a landlord unilaterally toll a limitation period by simply delaying its own billing.
Takeaways for Transactional Lawyers
First, allocate repair and replacement obligations expressly, element by element. General introductory language in a repair covenant will not cut down specific words like “all needed repairs and replacements” to the roof. Second, when a renewal clause adjusts a rent formula, say explicitly whether the new formula replaces or supplements the original. Decades of overpayments can be unwound. Third, written admissions are dangerous. The landlord’s 2008 letter accepting responsibility for roof replacement haunted it at trial. Fourth, advise clients to invoice promptly, because deferred billing will not extend a limitation period. Finally, if your client’s preferred interpretation depends on how the parties have actually been operating, document it in an amending agreement at the next renewal, because a court will never look at subsequent conduct if the lease is clear on its face.
For transactional lawyers, the message is steadying rather than alarming. Every one of these disputes was avoidable with clearer drafting and a cleaner record. The work that prevents a case like Metro v. Hillmond is the same work you do every day, done with the courtroom in mind.
