Executive Summary: Key Legal and Evidentiary Issues

• Fitness facility operator claimed lease extension due to COVID-19 closures under a force majeure clause

• Landlord argued that access remained available and ancillary uses could have continued

• Court found the lease’s primary purpose was frustrated as the space could not be used as a fitness facility

• Government-mandated closures qualified as “restrictive laws” under the force majeure definition

• Lease was extended by 348 days, and no additional rent was owed for that period

• Decision followed precedent from Court of Appeal in a nearly identical case involving the same tenant

Background and lease terms
LAF Canada Company operates a fitness facility and entered into a commercial lease with Woodbine Highway 7 Retail Inc. The lease included a force majeure clause that excused a party’s performance if hindered or prevented due to events beyond their control, such as “restrictive laws.” During the COVID-19 pandemic, government closures prohibited the operation of indoor fitness facilities. Although LAF continued to pay rent during the closures, it later sought to extend the lease term by 348 days—the same length of time the premises could not be used for their primary purpose.

Dispute over lease obligations and clause interpretation
The landlord argued that the space was always accessible and that LAF could have used it for various permitted ancillary purposes, such as virtual services or retail sales. LAF countered that its business revolved around in-person fitness use and that the closures rendered the premises unusable for their primary purpose. The lease explicitly defined this primary use as a health club and fitness facility, with ancillary uses being secondary.

Court’s analysis of force majeure application
Justice Parghi sided with LAF, relying heavily on the Ontario Court of Appeal’s decision in Niagara Falls Shopping Centre Inc. v. LAF Canada Company, a case involving the same tenant and a virtually identical lease. The court found that the government closures constituted a force majeure event, as they legally prevented the landlord from fulfilling its core obligation: providing space usable as a fitness facility. The judge emphasized that a technical breach is not required to trigger the clause—only a factual inability to perform as defined in the agreement.

Effect of the ruling and remedy granted
The court declared that the lease was extended by 348 days and that LAF owed no rent for that extension period, having already paid rent during the closures. The new expiry date for the lease was set as May 14, 2031, with any renewal option to begin the following day.

Costs and conclusion
LAF was awarded $30,000 in costs on a partial indemnity basis. The court noted that LAF was fully successful and had undertaken the bulk of the evidentiary work required for the application. This decision affirms the enforceability of force majeure clauses in the context of pandemic-related closures and underscores the importance of contractual language that defines a property’s primary use in commercial leasing.