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It’s a hospital, not a strip mall

September 16th, 2015 · No Comments

Just as the stigma surrounding mental illness has started to dissipate, the College Street location of the Centre for Addiction and Mental Health (CAMH) is facing a crisis of its own.

Its landlord, a numbered company owned by Brookfield Asset Management, is playing hardball during a scheduled negotiation in which it is seeking to increase the rent from $1.3 to $4 million, representing a whopping 333 per cent per annum. That amount also represents approximately 34 staff positions at a time when the hospital’s revenue is frozen – like that of all hospitals across the province – as Ontario experiences a fiscal crisis of its own.

CAMH served 31,000 patients last year, 9,000 of whom visited their emergency department, the province’s only 24-hour mental health emergency station. The Toronto Police Service relies heavily upon this facility to deal with members of the public whom it apprehends under the Mental Health Act. Also subject to the rent dispute is the adjacent building at 33 Russell St., which houses state-of-the-art reasearch facilities.

Moving that facility would cost more than the rent increase, a vulnerability that the landlord seems eager to capitalize on, as it squeezes the public health provider for all it can get.

Brookfield’s reps justify the rent increase by arguing that the land value is worth more for condominiums (because apparently we don’t have enough of those). There is a lease, and it stipulates that CAMH can expect three 20-year terms, the first of which began in 1998. The rent is subject to renegotiation at each renewal, with the next renewal slated for 2018.

It’s not the only thing the lease states. It reiterates that the site – zoned for institutional use – may only be used for a hospital. Any other use, such as a mixed-use condominium development, would require approval from the City of Toronto. Neighbouring University of Toronto, the city’s own planning department, and local city councillor Joe Cressy (Ward 20, Trinity-Spadina) have all signalled that they would vigorously oppose any application to change the site use designation.

The lease itself is a bit of a muddle insofar as it does not expressly say that the rent should be determined by a valuation of the lands for the permissible use. Brookfield takes the position that the rent should follow from the best possible use. Their interpretation is at best opportunistic but is really more of a robber baron approach from another era, and only relevant if the site were a strip mall and not a hospital serving the public interest. As Cressy says, the landlord is acting in bad faith.

In 2014 the Supreme Court of Canada sought to codify what “acting in good faith” means in a commercial common law sense. The court held that the rule of honest performance must prevail and parties must not knowingly mislead each other about matters directly linked to the performance of a contract. For Brookfied to instruct an appraiser to value the lands for a use that they are not permitted to apply is dishonest and self-serving.

How is it that such an important health provider finds itself in the crosshairs of an aggressive landlord?

In 2004, the Province of Ontario sold the properties to Brookfield for a mere $16.3 million in a liquidation of assets that was the bright idea of the Mike Harris-Ernie Eves government. Given that the province is the primary funder of CAMH, they essentially took a quick buck, permanently ceded the ownership of the lands, and forced the hospital to issue rent cheques instead of services.

Brookfield, which has nearly $30 billion in Canadian assets alone, claims on their website that it “remains focused on the creation of sustainable, growing streams of cash flow”. One might hope that a landlord with such scale and dominance could see a bigger picture and be sensitized to who its tenants are and what they doing for the greater good.

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