Whether it’s in the commercial or residential world, negotiating is always a messy process that leaves copious amounts of room for mistakes. Like forgetting to waive a condition or forgetting to add or delete a term in an agreement. The real issue is not just the fact that mistakes happen, but whether someone can take advantage of this oversight.
Can you use a mistake to get out of a bad deal?
It’s rare, but the law can be applied fairly and sneaky litigation tactics won’t always work. A recent Ontario decision confirmed that the actions of the parties negotiating a deal may overrule what’s written in a contract.
A tenant and landlord entered into an Offer to Lease. There is a condition in favour of the tenant to waive for inspection and a condition in favour of the landlord to waive for financial approval. The deadlines for these conditions have come and gone without anyone fulfilling or waiving these conditions. Yet, the tenant and landlord continue to negotiate the lease terms. In other words, while the legal document – the Offer to Lease – states that the contract is over, no one acts like the contract is over.
During negotiations, the tenant and landlord agree verbally and in vague email correspondence that they’ll not strictly apply their legal rights and agree to carry on the negotiation process. No formal amendments are signed, the tenant starts incurring expenses to renovate the unit and the landlord offers no indication that the tenant doesn’t meet the financial standards outlined as the condition of the Offer to Lease. That’s until the landlord has a change of heart and, without warning, claims that the Offer to Lease is void because neither party waived their conditions within the prescribed deadlines.
The evidence in this case is clear: the landlord is attempting to manipulate the law unfairly and use the contract as a litigation tactic. As such, the tenant sues, claiming that the landlord’s actions speak louder than the conditions of the contract and the landlord cannot benefit from such sneaky behaviour. Thankfully, the courts agreed.
The lesson learned:
Forgetting to waive a condition doesn’t necessarily mean that a deal is dead or that an agreement is void. Rather, if the parties verbally agree and act like the deal is going forward, the deal is still alive. A cautionary note: while this case means that your client won’t be penalized for your oversights that can happen during a negotiation, this doesn’t excuse sloppy work and it certainly doesn’t mean that you won’t end up in trouble before the regulator.
Natalka Falcomer is a lawyer, real estate broker and Certified Leasing Officer who started her real estate career in private equity. She created, hosted and co-produced a popular legal call-in show on Rogers TV and founded and recently sold Groundworks, a firm specializing in commercial leasing law. She is currently the Chief Real Estate Officer of Houseful.ca, leading the development and expansion of the company’s personalized home buying and selling experience for the Canadian market. She sits as an advisor on NAR REACH Canada and is the former multi-year board member of the Ontario Trillium Foundation.
