When Appraisals Clash: Lessons From A Commercial Property Dispute

What happens when a commercial tenant has the option to purchase the property that it is leasing but the parties cannot agree on the value? The simple answer is to do what the lease says. If they don't, it can result in the loss of a very valuable asset.

In an interesting dispute, the Ontario Court of Appeal was asked to settle a contentious disagreement over the purchase of two commercial properties in Whitby, Ontario. The properties were leased by the Tenant, a car dealership operator, from the Landlord, who owned and previously operated the dealerships for 18 years.

The properties were part of a 2015 deal where the Tenant bought the car dealerships for approximately $30 million, with leases allowing continued operation on the properties. Importantly, these leases included an option for the Tenant to purchase the properties, with the purchase price to be set by averaging two appraisals—one chosen by each party.