A recent case from the BC Supreme Court has highlighted yet again that a guarantee or indemnity of a lease (here now referred to as an “Indemnity”) does not necessarily assure payment to a landlord following a default by a tenant. The terms of the Indemnity must be carefully scrutinized and examined to determine if the specific circumstances outlined in the document are engaged in order for a call to be made on the indemnifier. A landlord cannot simply assume that because it obtained an Indemnity, it will be made whole if the tenant defaults in payment of rent or otherwise is in default of the lease.
In 848 Courtney Street Holdings Inc. v. JED Enterprises Ltd., 2014 BCSC 2301, a commercial landlord made a claim against a defaulting corporate tenant and its indemnifiers. The corporate tenant was a shell company that had been established by its principals who happened to be lawyers. It had no assets and therefore judgment was allowed to be taken against it. The real dispute was whether the indemnifiers, the lawyers who had been carrying on their law practices from the leased premises, were liable on the Indemnity which they had provided at the outset of the landlord/tenant relationship.
This article originally appeared on the Western Canada Business Litigation Blog. To read the full post, click here.
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