Ontario Court of Appeal: A Landlord’s “Sole Discretion” Cannot Wipe Out a Tenant’s Bargained-For Improvement

When a Toronto-area landlord locked a fresh flower distributor out of its loading docks, the tenant walked, sued, and won. In Convocation Flowers Incorporated v. Anisa Holdings Ltd., 2026 ONCA 145, the Court of Appeal upheld a finding that the landlord’s conduct amounted to a repudiation of the lease, entitling the tenant to treat the lease as ended and claim damages. The decision is a useful read for any commercial landlord or tenant in Ontario, and it contains three holdings worth knowing about before your next lease dispute.

The Short Version of the Facts

Convocation Flowers Inc. (CFI) leased a unit in 2018 and ran a fresh flower distribution business out of it. The lease included a schedule requiring the landlord to enlarge the door opening to the loading docks and raise the garage clearance, improvements built specifically so CFI could receive perishable inventory by large truck. The lease’s definition of common areas expressly included the loading docks.

In 2022, Anisa Holdings Ltd. bought the building and wanted the space for its own use. Negotiations to buy out the lease failed. On October 21, 2022, Anisa terminated CFI’s access to the loading docks. CFI sued within twelve days, secured a without-prejudice consent order restoring access for about two weeks, then relocated to new premises and amended its application to claim that Anisa had repudiated the lease.

The application judge agreed, and the Court of Appeal dismissed Anisa’s appeal.

Three Things Worth Knowing

A general “sole discretion” clause does not defeat a specific bargained-for right. Anisa relied heavily on a clause that allowed it to make rules governing the common areas in its sole discretion, along with the standard entire-agreement and no-representations clauses. Its argument was that this gave it the authority to redesignate the loading docks for its own use. The Court rejected that. Even where general discretion exists, it cannot be exercised in a way that defeats a specific term that the parties negotiated into the lease. The enlarged door improvement was the whole point of CFI’s tenancy. A discretion clause cannot be used to render that improvement useless. If you are a landlord drafting flexibility clauses, this is the boundary: general discretion is not a workaround for specific commitments. If you are a tenant negotiating, the lesson is to hard-wire your operational needs into a schedule and tie them explicitly to the permitted use.

Accepting interim relief on a without-prejudice basis does not lock you in. Anisa argued that because the temporary consent order had restored access, there was no longer a serious breach. The Court of Appeal had no time for this. To hold that an interim, without-prejudice arrangement waives the tenant’s right to later treat the lease as repudiated, the Court said, would render the phrase “without prejudice” meaningless. This matters in practice. Tenants facing a serious breach often need short-term accommodation to relocate or assess their options, and they should not lose substantive rights by accepting it.

A continuing breach gives the innocent party time to think. Anisa also argued, for the first time on appeal, that CFI had affirmed the lease by suing for declaratory relief rather than termination, and was therefore stuck with it. The Court refused to entertain the argument because it should have been raised below, but went on to say that where a breach is continuing, the innocent party is entitled to take reasonable time before deciding whether to accept the repudiation. You do not have to make a snap election at the moment of breach.

There is one terminology point worth flagging. The Court used the term “repudiatory breach” rather than “fundamental breach,” and footnote 1 of the decision is an extended explanation of why. The older “fundamental breach” label was historically tied to a separate doctrine about exclusion clauses that the Supreme Court of Canada laid to rest in Tercon Contractors Ltd. v. British Columbia, 2010 SCC 4. The Court of Appeal is signalling that practitioners should now use “repudiatory breach” or simply “repudiation” instead. If you are reading older cases or commentary, the older term usually means the same thing, but the new vocabulary is now the correct one.

What This Means in Practice

For tenants, the case is a useful template. CFI did not abandon the lease, did not refuse to mitigate, and did not jump straight to termination. It went to court within two weeks, secured interim access, used the breathing room to find new premises, and only then converted its proceeding into a repudiation claim. That sequence preserved its rights at every stage.

For landlords, particularly new owners taking over a building with existing tenants, the case is a warning. Discretion clauses, entire-agreement clauses, and no-representations clauses are not a license to unilaterally reconfigure the property in a way that defeats what the previous owner agreed to. Before making operational changes, read the lease, including any schedules, and assume that specific commitments will be enforced.

If You Are Facing a Similar Issue

We act regularly on commercial leasing disputes: landlord lockouts, common-area access, repudiation claims, and questions about how a sale of the property affects existing tenants. If you are dealing with any of these, we can give you a candid read on where you stand and what your options are.

Contact Erudite Law at 905-471-6161 or info@eruditelaw.com. Our office is in Richmond Hill, Ontario.

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Case reference: Convocation Flowers Incorporated v. Anisa Holdings Ltd., 2026 ONCA 145

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