City of Toronto out almost $600K in unpaid rent from 2 businesses due to 'administrative oversight'

Two downtown Toronto businesses that lease prime real estate from the city's parking agency have operated rent-free for the last five years, thanks to what city staff describe as an "administrative oversight."  

The two businesses operate on the ground floor of a multi-level city-run parking garage that takes up almost an entire city block in the heart of downtown Toronto on land owned by the Toronto Parking Authority (TPA) just steps from Yonge and Bloor Streets

The TPA admits that its leases with Elite Cleaners on Hayden Street and Tokyo Kitchen on Charles Street were supposed to be renewed in late 2017. For reasons that are still unclear, they never were. 

By the time staff realized what had happened, several years had passed, and the city was out about $600,000 in unpaid rent, according to a staff report to last week's meeting of the TPA. 

According to TPA board member and city councillor Mike Layton, these kinds of commercial real estate deals were secondary to the main responsibilities of the parking authority. 

"Our core business is parking lots and on-street parking," he said, "and there was, I believe, some confusion that resulted in those businesses not getting a lease renewal."

The TPA has come under scrutiny by city politicians in recent years for questionable land deals that include overbidding by millions for a parcel of land near Finch Avenue West and Highway 400 in North York, and last year attempting to sell a piece of city property near Yonge Street and Eglinton Avenue to a developer without authorization.

The North York land deal was scuttled by a city auditor's report in 2017 that uncovered the TPA's inflated offer, a controversy that led to the firing of the TPA's board of directors later that year.

Both Elite Cleaners, a drycleaning service, and Tokyo Kitchen, a Japanese bistro, have since come to an agreement with the TPA to pay most of the back rent. But those deals will cost the city tens of thousands of dollars, according to Layton.

"It will lose money here," he said. "[The city] identified the mistake about two years ago, but for the past two years they've been in negotiations with both retailers about what an appropriate repayment would be." 

City and TPA staff say the repayment settlements are confidential. Neither Tokyo Kitchen's owner nor a representative of Elite Cleaners would speak on camera, but representatives for both told CBC Toronto their offers to the city are tens of thousands of dollars less than what the city figures it lost — and was demanding they pay.

The TPA approved the settlements at its meeting Friday, but it will likely be months before city council puts its final stamp on them and new leases with the two businesses are finally hammered out.

The report presented at last Friday's TPA meeting, authored by TPA staff and the city's legal services department, suggests the two leases slipped through the cracks as responsibility for all municipal leases was being centralized under the city's Corporate Real Estate Management (CREM) banner, a process that began in January 2018 and is still underway, according to the TPA.

The staff report simply ascribes the oversight to "inadvertence."