Same Sex Divorce and Civil Marriage Act - Family Law

Review of the The Civil Marriage Act, S.C. 2005, c. 33

by Darryl Aarbo

I have had the opportunity to review the federal  Civil Marriage Act in force since June 26, 2013.  It carries the citation of 2005, but was not formally proclaimed until 2013.

As far as I am aware I am preparing the first divorce under this legislation in Alberta.  I have contacted the Clerk and this information has been confirmed to me.

I will not bore you with the technicalities of how to proceed with the divorce under the Civil Marriage Act, as opposed to the Divorce Act, because it is essentially the same procedure as a divorce using slightly modified Court forms.  Of particular note, however, is that the parties do not seem to be able to  seek corollary relief upon the divorce.  This means that they cannot seek spousal support, child support or deal with custody and access.  The legislation only deals with obtaining a divorce.

The reason this legislation came into its existence is because Canada allows same sex marriage.  What has happened is that couples have married in Canada then moved abroad.  If these couples find themselves in a jurisdiction that does not recognize same sex marriage then they cannot get divorced.  If a country does not recognize same sex marriage then they are not going to recognize same sex divorce.  This has put a number of couples throughout the world in an extremely difficult position.  They cannot get divorced.

The reason they cannot get divorced in Canada is because our Divorce Act requires them to be a resident for at least one year.  One cannot be a resident in Alberta and some other country at the same time.  The two are mutually exclusive.

What is particularly interesting about the legislation is that Part 2 of the legislation deals with the dissolution of marriage for non-resident spouses.  It is a fairly straight forward and technical legislation that allows people caught in this conundrum to obtain a divorce in Canada even if they live abroad.

What is also of particular note about the legislation is Part 1.  Part 1 of the legislation deals with the solemnization of marriage.  Why this is unusual is because this is the exclusive jurisdiction of the provinces.  Nevertheless, s. 3 of the legislation states that: “It is recognized that officials of religious groups are free to refuse to perform marriages that are not in accordance with their religious beliefs.”

Section 3.1 states and goes on to explain that the reason for this section is to reserve a freedom of conscience and religion guaranteed under the Charter.  It seems to be a twisted logic that the Charter of Rights and Freedoms is itself used to justify another breach of the Charter of Rights and Freedoms.  Normally the Courts engage in a balancing of rights, as opposed to using one right to override another right. 
In any event, it is this writer’s opinion that those sections ultra vires the federal government.  In other words, these sections would violate the Constitution Act, 1867.  The Constitution Act, 1867 divides up the powers between the provinces and federal government.  The solemnization of marriage is a provincial responsibility and it would appear that the federal government is trying to legislate within this realm. 

Darryl Aarbo

darrylaarbo@courteyaarbo.ca

Estate Planning Law -- Dealing with Land of Deceased

Land Interests of a Deceased in Alberta

When can they be Transferred and/or Sold?

By Courtney Aarbo Fuldauer LLP,  Barristers & Solicitors

In many cases the majority of a deceased’s estate value is made up of  land interests (house, condo,farm land). Their efficient transfer to ‘survivors’ and ‘beneficiaries’ is very important.

A first step for an Executor of a deceased is to determine what land interests in fact come into the Estate on a death.

If a deceased owned a land interest ‘jointly with right of survivorship’, then the land interest is not technically part of the estate, and does not become an asset under the will for the Executor to administer. Instead the land interest of the deceased transfers automatically on death, to be owned 100% by the ‘survivor’ on title. This method of ownership is typical of spouses and common law partners, meaning the surviving spouse/ partner will automatically become sole owner. What the survivor on title needs to do is file at the Land Titles Office the necessary ‘ Survivorship Declaration’, together with proof of the death.

All other forms of land titles ownership by a deceased will in fact fall into the deceased’s estate and be dealt with under the term’s of the will, or if no will, pursuant to the Wills and Succession Act of Alberta (for an intestacy).

A land ownership coming into the estate cannot have its title altered, be it to the name of a beneficiary, or to a new purchaser if being sold, until a Probate Order or Order for Administration is granted by a Justice of the Alberta Court of Queen’s Bench. The Land Titles Office by law cannot alter the title until there is a Court Order in place.

The obtaining of a Court Order will occur only after the Executor under the will, or the person applying to administer an estate, brings the necessary ‘Probate Application’, or ‘Application for Appointment of Administrator’ to the Courts. The procedure involves the filing of about a 10 to 15 page application touching on various aspects of the deceased, the beneficiaries, the will, and the estate value. At present the Court is taking about 2 months to approve an application once it is filed in the correct form.

Until the ‘Probate Order’ or ‘Order of Administration’ is granted by the Court, the Executor and Administrator have no ability to legally sign contracts listing or selling land, let alone signing a transfer to a beneficiary or purchaser. Once the Court Order is obtained it is filed at Land Titles and the land interest will be placed into the name of the Executor/Administrator. Only then can the Executor/Administrator sell or transfer the title.

It is not only essential for the Executor or Administrator of an Estate to understand the above procedure and timing for dealing with land interest in estates for sale or transfer purposes, it is also essential for all necessary steps to be taken to secure, insure, and safeguard the property while the process unfolds.

At Courtney Aarbo Barristers & Solicitors we are happy to assist you with any estate issues or concerns that might occur, including applying for Probate and Administration Orders, and transferring land interests.

For more information contact Courtney Aarbo Barristers & Solicitors at 3^rd Floor 1131 Kensington Road N.W., Calgary Alberta, T2N 3P4 or info@courtneyaarbo.ca or phone 403-571-5120.

Courtney Aarbo Barristers & Solicitors

www.courtneyaarbo.ca  

- The information contained in this blog is not legal advice. It should not be construed as legal advice and should not be relied upon as such. If you require legal advise, please contact a lawyer.

When to Probating a Will -- Estate Planning

What is “Probating a Will’ and

Are All Wills Probated in Alberta?

By Courtney Aarbo Fuldauer LLP, Lawyers

Probating a will is a procedure that occurs after a persons death where the Executor named in the will submits the will to the Court for review and approval.

Once a ‘Probate Application’ is submitted a Judge will review the will to determine its validity, and other information provided to the Court regarding the deceased, the family, the beneficiaries, and the assets/debts of the Estate. Beneficiaries will also be notified about the application.

Normally a Judge will then grant a ‘Probate Order’ approving the will and the Executor’s appointment. In Calgary at present the Court usually takes about 2 months to grant an order, once the correct and complete paperwork is filed at Court.

Most, but not all Wills need to be probated. If the deceased owned any interests in land that were not in ‘joint tenancy’ with someone else, so that on death the land interest goes into the estate, a probate must occur. Land Titles will not transfer a land interest in an estate until there is a certified copy of Probate Order registered.

If there are any bank accounts or investments of the deceased that were not being held in a ‘joint account’, or for which a named beneficiary or the investment would on death automatically receive the investment (an RRSP named beneficiary), then the will must be probated before the bank or investment company will allow the Executor to access the funds.

The rule of thumb really is that all wills need to be submitted to the Court for a Probate Application, unless really nothing of significant value goes into the estate on death because the deceased was a pauper, or the deceased’s assets were all transferred to people outside of the will through joint ownership or naming of beneficiaries on investment documents.

We do recommend that when a will needs to be ‘probated’, the Executor retain a lawyer. At Courtney Aarbo we will assist in providing necessary advise to the Executor on how to administer the Estate, we will prepare, serve, and file the Probate Application, transfer land interests once the Probate Order arrives, assist with finalizing the Estate, and be available for questions from Executors and Beneficiaries as the Estate is administered. The approximate fee cost for this work on a normal estate is between $2,500.00 and $4,000.00.

For more information contact Courtney Aarbo Barristers & Solicitors at 3^rd Floor 1131 Kensington Road N.W., Calgary Alberta, T2N 3P4 or info@courtneyaarbo.ca or phone 403-571-5120.

Gary C. Courtney

Courtney Aarbo Barristers & Solicitors

www.courtneyaarbo.ca  

- The information contained in this blog is not legal advice. It should not be construed as legal advice and should not be relied upon as such. If you require legal advise, please contact a lawyer.

Why do I need a will? Estate Planning Inforation from a Lawyer

What if I Die Without a Will?

By Courtney Aarbo Fuldauer LLP, Lawyers

A will is the basic legally binding document that we all should have prepared. Of course there are many occasions when people die without a will. I am often asked ‘what happens then?’

In Alberta a person dying without a will dies ‘intestate’. When this happens Part 3 of the Wills and Succession Act of Alberta governs what happens to your estate. I will attempt a brief summary of the distribution scheme imposed by the legislation;

Section  60       If you die learning a spouse or adult interdependent partner (‘common law spouse’) and no children, your entire estate goes to the spouse or adult interdependent partner;

Section  61       If you die leaving a spouse or adult interdependent partner and a child or children where your surviving spouse is also the parent, your spouse or adult interdependent partner gets your entire estate. If the spouse is not the parent of the child or children then the spouse or adult interdependent partner gets 50% and the child/children share the other 50%

Section  63       If you still have a spouse but you were separated at least 2 years or had a court order or agreement that is a final property split, then the spouse is deemed to have predeceased you and gets nothing.

Section  66       If you have no spouse or adult interdependent partner, but have children (or grandchildren) at the time of death, the estate will be split equally amongst your children or grandchildren, with a share also being split amongst grandchildren from a pre-deceasing child.

Section  67       If you have no spouse, adult interdependent partner, children, or  grandchildren, your estate goes first to your parents or parent of surviving, but if not it goes to your siblings.

Basically the act continues in its distribution scheme down the line of relatives to a

limited extent. In the event there are no relatives close enough to qualify then eventually the government of Alberta would become the beneficiary of last resort.

Of course many issues are not and really cannot be covered off by the above default legislation. Some of the more obvious problems when there is no will include:

1)      No appointment of an Executor as occurs in the will to look after the funeral and process the estate debts, assets and bequests. Instead an ‘Administrator’ must be appointed by the Courts;

2)      You will have no say over funeral arrangements, although usually a funeral home will ask your next of kin for direction;

3)      There will be no bequests of money or special keep sakes to chosen people or charities;

4)      There will be no ability to set up life estates for people in things like your home;

5)      Children and grandchildren will take at 18 years of age rather then at an older more mature age.

6)      You will not be able to set up a trust fund for young beneficiaries, for example your children, where money is held until a certain age by a trusted person and used for education and necessaries of life, until the child is old enough to manage the money wisely (say 25);

7)      While a young beneficiary is under 18 the government of Alberta will manage his or her money;

8)      If you have no surviving spouse, children or grandchildren, while the estate will likely go to your more extended family, nothing will go to your predeceasing spouses ‘blood’ relatives;

9)      You will not have a chance to name a guardian to look after your children who are under 18;

10)  The legal costs of the estate will likely be higher than if you had a will.

Hopefully after reviewing the above information you will agree that having a will prepared should be a priority. The fee for a couple doing a standard will is not prohibitive usually about $700.00 for the two, not each. The cost of a single will is normally $500.00.

For more information contact Courtney Aarbo Fuldauer LLP, Lawyers at 3^rd Floor 1131 Kensington Road N.W., Calgary Alberta, T2N 3P4 or info@courtneyaarbo.ca or phone 403-571-5120.

Courtney Aarbo Fuldauer LLP, 

www.courtneyaarbo.ca  

- The information contained in this blog is not legal advice. It should not be construed as legal advice and should not be relied upon as such. If you require legal advise, please contact a lawyer.

Human Rights and Employment Law Update - Vriend Restrospective

VRIEND v. ALBERTA

 15^th Anniversary of a Human Rights Milestone in

Constitutional Law and Employment Law

Darryl A. Aarbo, Barrister and Solicitor

Calgary, Alberta

This year represents the 15^th anniversary of a landmark decision in the area of human rights law, employment law and constitutional law. In 1998 the Supreme Court of Canada came out with a unanimous decision in Vriend v. Alberta [1998] 1 S.C.R. 493. This decision has had a huge effect on these three areas of the law over the last 15 years. It is a decision taught throughout the world and studied by students internationally, not just by lawyers but by constitutional experts and human rights advocates.

At first blush the decision looks like it is a gay rights case dealing with sexual orientation. Nevertheless, it is far more than that, although it is without question an important case for the LGBTQ community. 

Mr. Vriend worked as a laboratory coordinator at a college in Alberta. He held a full-time position and all of his evaluations were extremely positive. There were no blemishes on his employment record whatsoever. The college was a Christian college. It initially had no policy on sexual orientation but when it learned of Mr. Vriend’s sexual orientation then it came out with the policy and insisted upon his resignation. When he declined to resign, he was terminated. The sole reason given was his sexual orientation. The college was explicit that it was terminating him because of his sexual orientation.

Mr. Vriend attempted to file a complaint with the Alberta Human Rights Commission on the grounds that his employer had discriminated against him because of his sexual orientation, but the commission advised him that he could not make a complaint under the legislation because it did not include sexual orientation as a protected ground. 

Mr. Vriend sued the provincial government of Alberta because its human rights legislation did not cover sexual orientation. He did not sue the college or file a complaint against the college, but he went after the government because its legislation omitted sexual orientation in its protection.  This is the essential nature of the dispute and the basis for its complexity and why it had such a massive impact on constitutional law.

To put this case into its proper context for younger people or people living outside of the province of Alberta, the government of the province of Alberta at the time was a socially conservative group of individuals relative to other governments. Further, it was a big issue of the government at the time that unelected Judges were imposing their will on an elected legislative assembly.  Thus, when presented with an issue of gay rights and the possibility of the Courts imposing its will upon the government, the government opposed this litigation vehemently.

The case became a regular news item.  There were rallies and protests. There were fundraisers and organizations set up on both sides of the argument. It was extremely polarizing and contentious throughout Alberta and Canada. Interveners joined in the arguments on both sides. It was the modern Canadian equivalent of Edwards v. Canada (the “Persons Case”), the 1928 Canadian Supreme Court of Canada decision that found women were “persons”  and therefore eligible to sit in the Canadian Senate.  It could also be compared to Brown v. Board of Education, the landmark 1954 decision for the civil rights movement in the United States.  The Vriend case became a rallying point for human rights advocates on one side and socially conservative persons opposed to judicial intervention on the other.

Why was it such an important?  First, many argued that the Court was trying to regulate private activity. A misunderstanding of many people is that the Charter of Rights and Freedoms regulates the day-to-day lives of private citizens in Canada.  It does not.  The Constitution of Canada, which the Charter of Rights and Freedoms is a part of the, only regulates the various levels of governments in Canada. Constitutions throughout the world seek to regulate government activity, not private activity. In this instance many argued that what was being proposed was actually regulating private activity because Mr. Vriend was a private citizen who worked for a private college (although receiving government funding).  The Court found that it was not regulating private activity because it was dealing with government legislation. The twist here was that the government legislation in question did regulate private activity because it was human rights legislation.  Human rights legislation does govern acceptable behaviour of private citizens. Nevertheless, the decision only applied to the legislation, which was the activity of government in its regulation of private activity.

Second, and more important, the reason this case was so controversial at the time was that the Alberta’s human rights legislation omitted any reference to sexual orientation. Further, the Canadian Charter of Rights and Freedoms, a part of the Canadian Constitution, also omitted any explicit reference to sexual orientation. In its decision the Supreme Court of Canada read-in sexual orientation as a prohibited ground of discrimination into Alberta’s human right legislation and to do that it interpreted the Constitution of Canada as including protection for sexual orientation even though it was not explicitly written down by the drafters.  It expanded the scope of the Constitution itself by its own decision. It did so based upon well-established precedent and constitutional law and there were decisions leading up to this case that laid the foundation for what the court did, but it was considered by many to be an extraordinary example of judicial activism.

It is a monumental decision because it is an example of the old maxim that the constitution is a “living tree” or a “living document”.  The Courts interpreted the Constitution to protect a group of individuals who were being discriminated against at the time when the general population was only becoming more favorable to the idea of protecting their rights. Just as the Persons Case and the Brown decision were controversial in their time, this decision was also very controversial.  History judges the Persons case and the Brown case positively as progression towards equality for all and the Vriend decision is a long line of decisions where the Court’s protecting minority group not being protected by elected representatives. Further, the single most important aspect of this decision is that it leaves open the protection for groups that governments or the majority of people may not consider worthy of protection today.

Darryl Aarbo

darrylaarbo@courtneyaarbo.ca

What Happens to your Will if you get Married -- Family Law / Estate Planning Law

What Happens To Your Will If You Get Married/Divorced?

By Anthony Pranata, Barristers & Solicitors

October 15, 2013

This post will focus on two questions:

1. What happens to my Will if I get married/enter into an adult interdependent partner relationship (ex. common law relationship)?

2. What happens to my Will if I get divorced/terminate an AIP relationship?

Prior to February 2012, getting married or entering into an AIP relationship would have normally revoked your Will. This sometimes yielded undesirable results. For example, if you had a valid Will, then got married, and then passed away before making a new Will, you would have died without a Will.

Also prior to February 2012, getting divorced or terminating an AIP relationship had no effect on your Will. This also yielded undesirable results at times. For example, if you were married and you created a Will where you left everything to your spouse, then divorced, and then you passed away before changing your Will, you would have died leaving everything to your ex-spouse.

The answer to the above questions changed in February 2012 when the Alberta government consolidated several statutes and enacted the Wills and Succession Act of Alberta.

Under the Wills and Succession Act:

1. Getting married/entering into an AIP relationship DOES NOT REVOKE your current Will.

2. Getting divorced/terminating an AIP relationship DOES NOT REVOKE your current Will, but DOES REVOKE any gift or interest in property that you give to your ex-partner in your Will. The exception to this rule is if a court of law finds that you clearly intended to give that gift or interest in property to your ex-partner despite the divorce/termination of the AIP relationship.

For more information, please contact the law office of Courtney Aarbo Fuldauer LLP, Lawyers at:

Address:              3^rd Floor, 1131 Kensington Road NW, Calgary, AB, T2N 3P4

Phone:                (403) 571-5120

Email:                    info@courtneyaarbo.ca

Anthony Pranata

Barrister & Solicitor

www.courtneyaarbo.ca

*The information contained in this blog is not legal advice. It should not be construed as legal advice and should not be relied upon as such. If you require legal assistance, please contact a lawye

Unanimous Shareholder Agreements -- Corporate Law

Unanimous Shareholder’s Agreements

By Gary Courtney, Barrister & Solicitor

A typical unanimous shareholders agreement (USA) is an agreement signed by some or all (usually all) shareholders of a private corporation to deal with certain issues that may come up in the life of a corporation in the manner agreed to.

To back up a bit, in a corporation with no USA, it’s day to day affairs are run by a board of directors, who are elected annually by voting shareholders. The power of the shareholders to manage the corporation is basically limited to being able to vote in or out a director, and having to approve by a 2/3rds vote, fundamental changes to the Articles of Incorporation of the corporation (see the Alberta Business Corporations Act).

A typical USA will take some powers away from the board of directors and give them instead to the shareholders to approve. A ‘shareholders agreement’ can set out that certain action requires unanimous consent or less than unanimity of shareholders is needed red  (for example 67%).

Issues to be voted on by shareholders often include ones such as going into debt, spending money above a certain amount, issuing new shares, bringing in new shareholders, moving business locations, etc… Shareholders agreements also typically may deal with long term major issues, like;

-         How personal guarantees by shareholders of corporate debt will be handled, and that risk shared;

-         Provide remaining shareholders with a right of first refusal to buy a departing shareholders shares;

-         Provide for a trigger to force a buy out of a shareholder where it is necessary for him/her to be bought out, called a ‘shotgun’ clause;

-         Provide for buyouts on death, disability, or personal crisis in the lives of shareholders;

-         Set out a valuation formula for shares in any of the above situations;

-         A non-competition clause, confidential clause, and/or non-solicitation clause in the event of a shareholder leaving;

-         A dispute resolution mechanism for handling shareholder’s disputes.

Obviously USA’s are a key mechanism to deal with the longer term serious issues that are certain to come up in the life of a corporation where there is more than one shareholder. For example, unless all shareholders agree to wind up/ sell the business at the same time, there will be a future scenario where a shareholder leaves, and the remaining shareholders want to continue on. The USA allows this to occur without major disruption.

Another reason to consider having a USA deals with minority shareholders protection. If there are 3 shareholders owning 60%, 20%, and 20% of voting shares for example, the bottom line is without an agreement the 60% shareholders largely controls the corporation (there are a few restrictions on what a majority shareholder can do under the Business Corporations Act). A USA agreement requiring say an 80% or 100% vote for certain important issues will protect the minority shareholder.

So when is an agreement needed? At Courtney Aarbo Barristers & Solicitors we recommend one be considered anytime there is more than one shareholder. The more shareholders there are, the more important having a USA becomes.

If you have questions about unanimous shareholders agreements, or in fact any issue facing your corporation, the lawyers at Courtney Aarbo would be happy to discuss the issue with you.

For more information contact Courtney Aarbo Fuldauer LLP at www.courtneyaarbo.ca or at info@courtneyaarbo.ca or phone 403-571-5120. We are located at 3^rd Floor, 1131 Kensington Road N.W., Calgary, Alberta T2N 3P4.

Gary C. Courtney

Courtney Aarbo Fuldauer LLP

www.courtneyaarbo.ca  

Insurance Contract Legal Information for Small and Medium Sized Businesses

Insurance Contracts

By Gary Courtney,  Barrister & Solicitor

Providing Information to Assist Small Businesses

Typically most businesses will have fire insurance, business interruption insurance, and general liability insurance. Less common types of insurance include motor vehicle insurance, life insurance for owners and employees, and disability insurance for owners and employees.

Obviously insurance contracts can be critical to the life of one’s business, or for yours or your employees well being. For virtually all of us, the only time insurance policies are gone through in detail is when a claim is being made. Sometimes the policy will first be reviewed when the insurance company has denied a claim.

Insurance policies tend to be very long, very difficult to read and understand, and have a good deal of “fine print”. In spite of this, these agreements need to be thoroughly reviewed BEFORE one needs to make a claim. If is important for any business to obtain the advice of a good insurance broker or agent, with experience in assisting business owners.

If one does not have the time or inclination to review insurance policies exhaustively, one can lessen the risk of not obtaining proper coverage by making it clear to the insurance agent/broker, what kind of insurance coverage is desired, to cover what eventualities. Your request for advice from the agent/broker should be in writing, keeping a copy for yourself. In the event that a claim is made for insurance coverage of the kind you instructed the agent/broker you wanted, and it turns out that coverage was not provided, it is possible that one will be able to claim negligence against the agent/broker,

It is good practice to ask the insurance agent/broker to explain (in writing), the exclusions under the insurance policies. In the event your claim is later denied for an exclusion that was not set out, one may be able to successfully claim against the agent/broker, or insurance company for coverage.

Never give false information, or omit to provide relevant information to an insurance company. Information that one fails to mention in an insurance application, often will be grounds for a denial of coverage when a claim is made.

It is good practice to review the adequacy of insurance coverage periodically as one’s business grows and changes.

In the event that a claim for insurance is denied, consult with a lawyer. When one makes a claim on insurance, one becomes a liability to the insurance company, which liability the insurance company often attempts to minimize. Sometimes an over zealous insurance adjuster will interpret terms of the insurance contract in ways that will not stand up if challenged. It may be that a letter from the lawyer will change the adjusters decision. Courts generally will interpret provisions of insurance agreements strictly against the insurance company.

For more information contact Courtney Aarbo Barristers & Solicitors at 3^rd Floor 1131 Kensington Road N.W., Calgary Alberta T2N 3P4 or info@courtneyaarbo.ca or phone 403-571-5120.

Gary C. Courtney

Courtney Aarbo Barristers & Solicitors

www.courtneyaarbo.ca

Commercial Leases -- Ten Common Problem terms from a Corporate Lawyer

Ten Common Problem Terms in Commercial Leases

By Gary Courtney, Barristers & Solicitors

Providing Information to Assist Small Businesses

One of the important and costly agreements entered into by virtually all businesses new and old is a commercial lease for their premises.

What follows is some commentary on terms of commercial leases that often cause tenants difficulty:

1. Commencement of the Lease Term. When reviewing a lease one will normally find that a Landlord will only agree to use its best efforts to deliver the premises on a specific date, and be released from liability for any damages which may arise as a result of late possession. For the tenant a fixed possession date might be critical. There should be a provision setting an outside date by which possession must be delivered. The commencement date should provide the Tenant ample time move in and open for business.

2. Percentage Rent. Many Leases contain provisions for additional rent to be paid based upon a percentage of gross sales. The definition of gross sales is critical and those items included and excluded from gross sales should be carefully reviewed. Better yet, try to have this clause omitted.

3. Operating/ Additional Cost. The definition of these costs is critical to the overall costs to the tenant of the lease, as these cost payments can be substantial. The definition of occupancy costs should be reviewed carefully to ensure that there is no double charging, for example, by including both a depreciation charge and a capital cost replacement charge for parts of the building that need replacing. Care should be taken to ensure that the portion payable by the tenant is the proportion the leased premises bears to the whole of the rented and rentable area of the building. In the event there is a vacant space in the building, the Landlord should bear the common area costs in respect of such vacant area. It is also essential that your agreement provide proper and full accounting of the claimed costs.

4. Insurance. The types and dollar levels of insurance required of the tenant should be reviewed with insurance advisors to confirm a tenant is able to comply with such requirements.

5. Caveats. Commercial Leases normally prohibit the tenant from filing a copy of the Lease with the Land Titles Office. This provisions is inserted as Landlords do not wish the business terms of each Lease transaction to be available for public scrutiny. However, the Lease should not prevent the tenant from filing a Caveat at Land Titles on title to the property to protect its interest in the lease, (only available if the Lease term is three years or more). It is critical to register this caveat or else you risk having your lease ignored by a future buyer or financier of the property.

6. Subletting and Assignment. Any prohibitions that require a landlord’s consent should be qualified by the proviso that such consent will not be unreasonably withheld. These clauses are very complex and need to be carefully reviewed. These clauses become critical if the tenant wants to move location for example.

7. Option to Renew. Should be contained in virtually all Leases. The Option to Renew usually provides that if the lease is renewed for a new term it will be on the same terns as the initial lease, except for the amount of rent. An option to renew should provide for some fair method of determining the rent for the new term.

8. Default. All default provisions (except perhaps for a default in the payment of rent) should be qualified by the requirement for the landlord to give notice to the tenant and provide the tenant with a reasonable period of time within which to remedy any default before the landlord is permitted to exercise its remedies under the lease.

9. Demolition Clause (Sale Clause). Allows for the termination of the lease in case of demolition or sale of the premises. If the landlord wants one the tenant should investigate what is happening at the property and perhaps argue for terms compensating him if the clauses are acted upon.

10. Environmental Clauses. These terms should be carefully reviewed to insure the tenant does not have to pay for the clean up of environmental problems for which it is not a fault.

For more information contact Courtney Aarbo Barristers & Solicitors at 3^rd Floor 1131 Kensington Road N.W., Calgary Alberta T2N 3P4 or info@courtneyaarbo.ca or phone 403-571-5120.

Gary C. Courtney

Courtney Aarbo Barristers & Solicitors

www.courtneyaarbo.ca

Commercial Lease Basics -- Lawyer Tips for Small and Medium Sized Businesses

Commercial Lease Basics

By Courtney Aarbo, Barristers & Solicitors

Providing Information to Assist Small Businesses

One of the most important, and costly agreements entered into by virtually all businesses new and old, is a commercial lease for their premises.

The standard lease agreement for commercial space will almost always be the longest and most difficult to understand “standard form” agreement one will have to deal with. The lease agreement of the 50 page variety will almost without exception be extremely one sided providing the Landlord with everything conceivable, and the Tenant with the minimum possible protection.

Despite what the leasing agent of the landlord lets on, the Tenant has a lot of bargaining power. Many of the one sided terms in the standard form lease blank can be eliminated or amended, resulting in large savings to the Tenant.

Given all these factors it is a very wise investment to retain professional help such as a lease broker and / or lawyer to help.

What follows are general recommendations when dealing with lease negotiations and the lease itself:

1. The commercial leasing agent, while useful to advise you efficiently as to the rental space on the market, is not the best person to provide you with advice on whether you are getting a “good deal”. Remember, the leasing agent is paid usually a percentage commission by the Landlord, only if he rents the space.

2. It is critical that you have an idea as to the market rate for space before you start bargaining on a specific location. Look around. Make inquiries. You should  approach your search in a fashion similar to how you would look for a house.

3. Everything is negotiable (within reason).

4. Gross rent usually means the total amount the tenant will pay to the Landlord- it is a fixed sum. Net rent plus operating costs is not a fixed sum. The net rent to the Landlord (his “profit”) is fixed, but the operating costs will fluctuate (usually going up) through the lease term. Often the operating costs are more than the net rent. With Gross rent you should have a known fixed sum per month for you to pay during the entire term.

5. Most commercial leases involve net rent plus operating costs. It is crucial that you obtain a history of the operating costs for the space and that you have a good assurance as to what to expect during the lease term. For example, if a property tax reassessment is in the works- it has been known for operating costs to double in one year due to property tax increases. It is critical that you obtain a detailed definition of what is included in operating costs. Sometimes Landlords try to charge inappropriate items as operating costs. It is critical that the lease stipulates that the tenant get a proper account of the operating cost charges each year.

6. If you operate through a corporation, personal guarantees of the rent payment by your corporation are almost always requested, but can frequently be eliminated or reduced in negotiations. Remember that you set up a corporation to avoid personal liability, so it is obviously unwise to lose the protection through a huge personal guarantee.

7. Tenant inducements like several “free” months rent, or money towards tenant improvements are regularly given by Landlords (and appreciated by tenants starting out in business). Nothing comes “free” however, as most Landlords will have calculated the payback for the tenant inducements by requiring higher rent during the balance of the term. If you don’t require tenant inducements, then require lower rent.

8. Most commercial leases involve a 5 or 6 page “Offer to Lease” and a 50 page lease (to be signed later) The Offer to Lease is a binding legal document that may in fact constitute a binding lease. Most major terms are set out in the offer. Going to your lawyer for advice on matters covered in the Offer to Lease, after it is signed is too late. At a minimum make sure the offer contains a term that it is subject to approval by your lawyer, and that your lawyer can propose reasonable amendments to the lease itself. Better yet, call the lawyer in during negotiations, where he or she can do the most good.

9. Get any “verbal” assurance put into the offer and lease. Virtually all offers and leases have a clause that says there have been no representations except what is in the document in writing. If it is not written in, you may not get the concession.

10. That 50 page document which the leasing agent says is “standard” contains 50 pages of detailed legal clauses, many of which you will have difficulty understanding and many of which should be eliminated or amended. These clauses are important. The fact that it is the “Landlord’s Standard Lease” should tell you that it is written for the Landlord’s benefit, not yours. Have your lawyer review it before you sign it.

For more information contact Courtney Aarbo Barristers & Solicitors at 3^rd Floor 1131 Kensington Road N.W., Calgary Alberta T2N 3P4 or info@courtneyaarbo,ca or phone 403-571-5120.

Gary C. Courtney

Courtney Aarbo Barristers & Solicitors
www.courtneyaarbo.ca