What Damages Can Be Claimed for a Commercial Lease Breach?
A recent trial decision, Vista Sudbury Hotels Inc. v The Oshawa Group Limited, demonstrates what damages a commercial landlord can claim when a tenant breaches their lease by terminating early.[1] The judge examined the landlord’s losses after the breach and determined which ones were compensable based on how foreseeable the loss was and how closely tied it was to the breach.
Facts of Vista v Oshawa Group
Vista owns a mall in downtown Sudbury, which contains many commercial tenants. Its principal tenant, the retailer Zellers, suffered significant financial losses following the mall going into receivership in 1993. Vista took over the largely-vacant mall in 2001 and began revitalization efforts, signing multiple new leases and restoring the mall’s profitability.
In February 2004, Zellers suddenly announced it would be leaving the mall ahead of its lease ending. Vista executives had very little time to adjust to Zellers’ decision before it formally closed in May 2004, forcing the mall to find a new principal tenant on short notice. In the years following Zellers’ departure, Vista performed numerous costly renovations on the mall and had many other tenants terminate their leases.
An earlier appeal found that Zellers breached its lease, leaving the issue of which of Vista’s damages are attributable to Zellers’ early departure.
Damages Attributable to the Breach
Damages in a commercial breach are recoverable if they foreseeably arise from the breach, and if the parties reasonably understood they might arise when they entered the contract.[2] Rather than the breach itself, what must be contemplated is whether the parties believed that specific loss could occur if a breach happened. If not, then the damage is too remote to be recoverable.
In Vista, the plaintiff sought unpaid rent for the remainder of Zellers’ lease (nearly a full year), plus losses resulting from the repudiation. Applying the test for damages, foreseeability was calculated based on the time that the lease was formed, not during the years the mall was struggling.[3] The lease terms suggest an understanding that Zellers’ departure would harm the mall’s business, and that Zellers ultimately gave Vista far less time to mitigate (minimize its losses) than what the lease provided for. Because of these factors, Zellers vacating on short notice was deemed foreseeable and compensable.
Another loss arose from the cost of finding a replacement tenant, Hart Stores Inc. (“Hart”), with whom Vista had been in talks with before Zellers vacated. While damages were limited because Vista would have eventually needed to replace Zellers regardless of the breach, the sudden vacancy required Vista to concede to more generous terms in favour of Hart.[4] Some of the additional expenses Vista agreed to in Hart’s lease were also reasonably foreseeable as damages.
Following the breach, numerous other leases in the mall were terminated or renegotiated. For one tenant, Vista agreed to pay for repairing its HVAC system, which previously was to be borne by the tenant. It was “reasonably foreseeable” that Zellers’ breach would force Vista to add new inducements for its remaining tenants.[5] Of the subsequent lease terminations, damages were awarded where the losses from unpaid rent, caused by the fallout of a landlord-tenant relationship, naturally arose from the breach.
Damages that are Too Remote and Non-Compensable
The court denied several claims where the loss would have occurred regardless of the breach. For example, Vista argued that it made costly renovations to the mall to mitigate its damages, including relocation of the food court. However, evidence suggested that these renovations were in Vista’s plans beforehand and not sufficiently connected to the breach.[6]
Similarly, other damages related to lost tenancies were not compensable, such as for businesses that were already failing and would likely have vacated soon even without the breach. For one departed tenant, Vista was not entitled to damages for the costs of reconfiguring the retail space afterward, which were deemed not to be mitigation but underwriting for benefits to be received from the replacement tenant.
Vista also claimed damages for lost rent from prospective tenants, who would have joined the mall if it weren’t for Zellers’ breach. The court rejected this for lack of evidence, as a plaintiff arguing lost opportunity damages must prove a “reasonable probability” that the opportunity would have occurred.[7] Given that Zellers was not planning to renew its lease regardless, it was even less likely that the breach was responsible for Vista’s difficulty in attracting new tenants.
What Does Vista Say About Calculating Damages?
The final damages awarded to Vista were $570,216.02, significantly lower than the $12,070,866.49 initially sought. This case provides helpful examples on a variety of grounds for commercial breach claims, showing which losses are reasonably foreseeable by the contracting parties while others are too remote.
If your commercial lease has been breached and you want to know what damages you are owed, our commercial litigation team at Walker Law has a wealth of experience in handling commercial real estate disputes. Please don’t hesitate to reach out for a consultation.
Tags: Civil Litigation Law, Commercial Litigation Law, Commercial Real Estate Disputes.
[1] Vista Sudbury Hotels Inc. v. The Oshawa Group Limited., 2026 ONSC 313
[2] Tabrizi v. Majesty Development Group Inc., 2022 ONSC 1933
[3] Vista at para 51
[4] Vista at paras 77-78.
[5] Vista at paras 115-117.
[6] Vista at paras 95-99.
[7] Vista at paras 199-200.