Restaurant gets some declaratory relief in landlord-tenant dispute dating back to 2017
In a proceeding involving premises within a shopping plaza leased by McDonald's Restaurants of Canada Limited, the Ontario Court of Appeal upheld the dismissal of the plaza owner’s application for a declaration that the commercial lease had expired.
North Elgin Centre Inc. owned and operated a shopping plaza. Under a ground lease, McDonald’s leased premises occupying a portion of the plaza. Since 1997, McDonald’s has run a restaurant on the premises.
North Elgin wanted to end the lease and develop the site. In 2016, North Elgin prepared a concept plan for a high-density and mixed-use development, including a residential tower on the site where the McDonald’s restaurant stood.
McDonald’s attempted to exercise its option rights under the lease for two successive 10-year renewal terms. If successful, McDonald’s could keep the premises for four decades from the lease commencement date of Mar. 11, 1997.
The parties became involved in a lengthy, ongoing dispute dating back to 2017. North Elgin applied for relief declaring the lease terminated as void, of no force or effect, and at an end. If it succeeded, North Elgin would then seek a writ of possession and overhold rent from Mar. 11, 2018.
McDonald’s applied for relief declaring the lease renewed for a second renewal term from Mar. 11, 2027, to Mar. 10, 2037. McDonald’s also wanted North Elgin to cooperate in obtaining the approval needed to give effect to the first renewal term from Mar. 11, 2017, to Mar. 11, 2027, and the second renewal term.
Lease renewed
On Apr. 15, 2025, in McDonald’s Restaurants of Canada Limited v. North Elgin Centre Inc., 2025 ONSC 1985, Justice John Callaghan of the Ontario Superior Court of Justice dismissed North Elgin’s application to declare the lease terminated and denied North Elgin’s remaining requested relief.
The application judge granted McDonald’s application to declare the lease renewed for the second renewal term and refused McDonald’s other requested relief. McDonald’s then obtained a $225,000 cost award.
North Elgin appealed the dismissal of its application seeking a declaration that the lease expired on Mar. 11, 2018, and other relief based on McDonald’s alleged overholding. North Elgin contended that the failure to obtain timely approval under Ontario’s Planning Act, 1990, ended the lease and prevented additional renewals.
The parties moved to admit fresh evidence regarding the status of the Planning Act approval process.
Appeal denied
Last Feb. 20, in McDonald's Restaurants of Canada Limited v. North Elgin Centre Inc., 2026 ONCA 129, the Court of Appeal for Ontario dismissed North Elgin’s appeal and found McDonald’s entitled to $25,000 in all-inclusive appeal costs.
The appeal court noted that North Elgin essentially repeated the same arguments that the application judge had rejected. The appeal court ruled that the judge:
- issued careful reasons
- committed no error in his analysis and conclusions
- could determine that McDonald’s continued taking appropriate steps to obtain the necessary Planning Act approval
- considered the renewals permissible subject to Planning Act approval, consistently with previous rulings
The appeal court rejected the appellant’s argument that the judge’s order effectively prevented it from protecting its interests as the landowner in the Planning Act approval process.
According to the appeal court, consistently with its previous decisions, the judge’s order did not preclude the appellant from submitting conditions, except those that vitiated its consent or rendered it nugatory.
The appeal court pointed out that the parties did not ask the judge to clarify any ambiguity in his order.
The appeal court denied the motions to admit fresh evidence, which would be irrelevant to the appeal’s outcome. The appeal court noted that the judge anticipated that the approval process would continue and conclude after the issuance of his decision.
Lastly, the appeal court saw no error in the judge’s order awarding McDonald’s $225,000 in costs. The appeal court found that the discretionary order deserved high appellate deference.
