Executive Summary: Key Legal and Evidentiary Issues

• The Ontario Superior Court of Justice found that a signed Agreement of Purchase and Sale created a binding five-year commercial lease over the Premises.
   
• Contractual interpretation principles from Sattva Capital Corp. v. Creston Moly Corp. guided the court's reading of the agreement as a whole.
   
• Conflicting evidence about events following the sole director's death did not establish that the lease had been replaced by a new tenancy.
   
• An unsigned Indenture that the landlord alleged governed additional lease terms was found not to bind the parties.
   
• Insurance-related breaches, including a nine-day coverage gap, did not justify termination or deny relief from forfeiture under the Commercial Tenancies Act.
   
• A unilateral rent increase imposed by the landlord resulted in an overpayment order in the tenant corporation's favour.
   

Facts of the case

1000662603 Ontario Inc. (the "Corporation") and Rito Gizzarelli ("Rito") each applied against the other regarding Unit 2, 100 Nebo Road, Hamilton, Ontario (the "Premises"). Rito owns the Premises. The Corporation asserted it held a valid five-year lease; Rito asserted a month-to-month tenancy at will existed because no formal lease was signed, and that this tenancy (or, alternatively, the lease) had been validly terminated. Rito also added Derrick Laffin and Beverly Bates as respondents. On November 4, 2025, Valente J. granted a without-prejudice consent interim order requiring rent payment and preventing Rito from re-entering the Premises or disturbing the Corporation's possession.

The dispute arose from a September 27, 2023 Agreement of Purchase and Sale ("APS") under which the Corporation purchased Rito's tire business, Satellite Tire, which operated from the Premises. The APS closed on October 31, 2023, without a separate lease agreement being finalized. Spencer Laffin, the Corporation's sole director and officer, operated the business until he was shot and killed on the Premises on December 11, 2023. The parties' accounts of what happened afterward diverged sharply: Rito claimed he entered a new oral month-to-month arrangement with Derrick and Beverly, while Beverly maintained the business continued under the APS or, alternatively, an unsigned document called the Indenture. In January 2025, Rito proposed a draft Agreement to Lease naming Beverly as tenant, with higher rent and a shorter term; it was never signed. Rito later issued a Notice to Quit, a Notice of Default, and a Notice of Termination of Lease.

Policy and legislative provisions at issue

The central contractual provisions were found in the APS and its Schedule A. At paragraph 7(c), Rito covenanted that "there is a good, valid, and subsisting lease of the premises for a term of 5 years at a monthly rental of $3,500" expiring October 31, 2028 ("Rito's Lease Covenant"). At paragraph 8(b), Rito covenanted to deliver the lessor's written consent to assignment if required ("Rito's Assignment Covenant"). Schedule A set rent at $3,500 per month, covering base rent, property taxes, and exterior maintenance, with the Corporation responsible for utilities, interior repair and maintenance, snow removal, and commercial tenant liability insurance. Schedule A also referenced a "proposed lease" to be set out in a separate agreement completed before closing, which never occurred, and gave the Corporation a right to renew for additional five-year terms if not in default.

Relief from forfeiture was assessed under sections 19(2) and 20 of the Commercial Tenancies Act, RSO 1990, c. L.7 ("CTA"). Section 20(1) allows a court to grant relief from a landlord's right of re-entry or forfeiture on such terms as it considers just. Section 20(8) restricts relief where a forfeiture relates to a breach of a covenant to insure and no insurance is on foot at the time relief is sought, absent a term requiring insurance to be put in place. Section 19(2) requires a landlord to give notice of a breach, other than non-payment of rent, before enforcing a right of re-entry.

Reasoning and analysis

Applying the interpretive framework from Sattva Capital Corp. v. Creston Moly Corp. and Corner Brook (City) v. Bailey, the court read the APS as a whole rather than isolating the phrase "proposed lease." It found that Rito's Lease Covenant, Rito's Assignment Covenant, the Schedule A rent and responsibility terms, and the structure of purchase payments over 24 months all pointed to an existing, fixed five-year lease rather than a mere agreement to agree. The court concluded no essential lease terms were missing or uncertain, all being set out in the APS itself.

The court declined to find the agreement ambiguous, but nonetheless considered the parties' subsequent conduct, which it found supported the same conclusion. Rent of $3,500 and Monthly Installment payments continued to be paid after closing, with receipts consistently made out to Satellite Tire, even after Spencer's death and through changes in who physically delivered the cash. The court rejected Rito's evidence that a new month-to-month tenancy had been formed with Derrick and Beverly, finding his account self-serving and inconsistent with the documentary record, and found the unsigned Indenture never became binding. The court also found Rito unilaterally and improperly increased rent to $5,051 per month effective July 2024, when the correct composition remained $3,500 rent plus the $1,051 Monthly Installment; the actual amount paid, $4,000 in rent plus the installment, produced a $500 monthly overpayment.

On the insurance issues, the court found a nine-day gap in coverage at the start of the tenancy but no requirement in the APS that Rito be named an additional insured before November 2025. Weighing the discretionary factors described by the Court of Appeal for Ontario in Hudson's Bay Company ULC v. Oxford Properties Retail Holdings II Inc., the court found the brief insurance gap caused no loss to Rito, that insurance had since been in place for over two years, and that terminating the tenancy would likely end the Corporation's business, making forfeiture inequitable.

Ruling and overall outcome

Rito's application was dismissed, and the Corporation's application was granted. The court declared that a valid and enforceable five-year commercial lease exists between the Corporation and Rito at $3,500 per month, expiring October 31, 2028, with a renewal right, and held that Rito's Notice to Quit and Notices of Default were invalid. The Corporation was granted relief from forfeiture, subject to providing ongoing proof of insurance and naming Rito as an additional insured, along with a permanent injunction restraining Rito from interfering with the Corporation's use of the Premises and a requirement that future rent be paid by post-dated cheques. Rito was ordered to repay the Corporation's overpayment of rent at $500 per month from July 2024 to the date of judgment, failing which the Corporation may withhold that amount from future rent, plus prejudgment interest at the Courts of Justice Act rate. The judgment does not state a total dollar figure for the overpayment; only the $500 monthly rate is specified. Costs were left to be resolved by the parties, with submissions due by October 9, 2026, failing which costs would be deemed settled.