38 Effect Of Merger On Subleases

PRACTICE

Preservation of Incidents of Subleases

Section 38 preserves incidents of subleases that would otherwise be destroyed by surrender or merger of a headlease. When discharging a head lease, the registrar also amends the notation for the sublease to read “formerly sublease of Lease # _____, see s. 38 of the Property Law Act”.

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

Secondary Sources

See the following for further information:

• Di Castri, Registration of Title to Land, vol. 2, para. 392
• Megarry and Wade, The Law of Real Property, 5th ed. (Canada Law Book, 1985), pp. 684 to 686

CASE LAW

Surrender

A tenant granted the appellant credit union a debenture over the tenant’s interest in a lease. Following the tenant’s default and assignment in bankruptcy, the respondent landlord argued that if, as the court confirmed, the debenture operated as a sublease, then the credit union became liable to pay rent when the trustee in bankruptcy relinquished or disclaimed any interest in the tenant’s assets such that the entire tenancy became vested in the credit union by operation of s. 38. While s. 38 entitled the credit union to take the position of tenant or lessee under the lease, that entitlement did not impose upon it liability to pay rent. The credit union in fact did not pay rent, nor did it exercise any right to which it might have been entitled as a lessee. Accordingly, it was under no obligation to the landlord (Mavrikos v. Island Savings Credit Union, 1991 CanLII 1149 (BC CA)).