A contract is an agreement between the parties and the written part of it is only proof thereof. Indeed, agreements are often made orally and only put down on paper as a matter of clarity and for evidence. Moreover, often, when relations are good between two people, this last detail is forgotten.
The law is clear, the buyer has the obligation to respect existing leases under the Civil Code of Québec:
“1937. The voluntary or forced alienation of an immovable comprising a dwelling or the extinction of the title of the lessor does not permit the new lessor to resiliate the lease, which is continued and may be renewed in the same manner as any other lease.
The new lessor has, towards the lessee, the rights and obligations resulting from the lease.”
In the portion of the phrase: the rights and obligations resulting from the lease, we must therefore understand the rights and obligations under the lease but also any verbal agreement that follows from it. This may seem absurd and cause huge headaches to the new owner of a revenue- generating property who bases his purchase on the written terms of existing leases. An aberration, possibly, but still very real.
Thus, the fact that there is a change of ownership is not supposed to change the rights or obligations of the tenant, because it concerns a full assignment of obligations of the former landlord.
In a case (1) where one questioned the effectiveness of a side-agreement, i.e. a second document signed between the owner-seller and the tenant to reduce the price of the rent, it was decided that this amendment to the lease was an integral part of the original contract between the parties and therefore binding the new purchaser who had, moreover, been made aware of this second agreement.
Thus, if there is disparity between the obligations reported and those actually assumed the reproach from the new purchaser can only be addressed to his vendor. (2)
“If a verbal agreement concluded verbally and in good faith between the former owner-landlord and the tenant, but not reported to the new owner must be assumed by the latter, then, a fortiori, the one agreed upon in writing and fully reported by the tenant to the new owners-landlords must also be.” (3)
Our best advice then is to inquire into any verbal agreement when checking the leases for the purchase of a building and most importantly, never take lightly an OK to a proposal, even verbally.
(1) 31 100212 065 G, 2010 QCRDL 29148.
(2) 500-09-014273-049, 8 July 2004.
(3) Supra note 1.