A recent judgment issued by the Supreme Court of British Columbia illustrates the importance of having clear agreements between parties prior to spending a lot of money.  The case involved a commercial tenancy dispute between two plaintiffs, Abraham Berhe and Emebet Belay and their commercial landlord defendant, Coblenz Holdings Ltd.

The plaintiffs owned and operated a hair salon called “Afro Hair Studio” on Commercial Drive in Vancouver.  The hair salon catered specifically for Afro hair styles.  As their business became more successful they looked at expanding and  entered into discussions to lease a property on East Hastings Street owned by the defendant company (the “Premises”).  The parties entered into discussions and signed a preliminary agreement in November, 2010.  The plaintiff also paid a deposit for the new premises.

The crux of this dispute was the intended use of the Premises.  The plaintiffs testified that they intended to use the Premises for a hair salon and beauty parlor that offered a wider range of services than those they provided at their Commercial Drive location.  The plaintiffs said that they had told the defendant of their intended use and when they signed their a brief tenancy agreement in November, 2010 and there were no restrictions on the use of the Premises set out within that agreement.

However, the defendant had a longstanding tenant in a neighbouring building who had operated a barbershop for 40 years.  Although there is some dispute as to when this issue was raised, the defendant tried to place restrictions on the plaintiffs use of the Premises because of the direct competition that could occur between the plaintiffs and his current, long-standing tenant.  Specifically, the defendant tried to limit the use of the Premises so that the plaintiffs could not advertise that they offered white men’s haircuts.  The plaintiffs disagreed with this restriction and sued for breach of contract.

By the time this issue came to a head, on or around the end of February, 2011, the plaintiffs had spent a considerable amount of time and money renovating the Premises so that it could be converted from its prior use (a Dollar Store) to a beauty salon.  Although the parties had signed a tenancy agreement, the more substantial lease document was still being negotiated when this issue became acute.  The plaintiffs ended up vacating the Premises and then suing the defendants for breach of contract.

The defendant argued that the restriction on white men’s haircuts had always been a verbal agreement between the parties from day one of the lease but because the original written letter agreement did not specify a term of use of the Premises the plaintiffs were successful in this action. At trial, the plaintiffs were awarded $67,706.50 for the material and labour costs that they incurred, they were also awarded costs.  This is an example of how important it is to have underlying documentation of the agreement reached between the parties.  The full text of the judgment can be found here.