Commercial Leases
Leases and Renting
People tend to use the term renting and leasing interchangeably: someone might say. “I’m renting/leasing an industrial unit.” Rental, however, tends to refer to short term agreements, as is the case when renting a car or a tool for several days. Agreements for the long term, as is the case for commercial properties, involve leases.
While the lessee (the renter) should read the lease terms carefully, lessors must draw up the agreement such that they are fully protected. As a landlord, for example, you are putting thousands of dollars of property as well as the future income from it, into the hands of a stranger. Many tenants are reputable, but it simply makes good sense to protect yourself and your property from those who are not.
Commercial matters fall under the Ontario Commercial Tenancies Act, 1990. Fortunately for commercial landlords, this law is flexible, giving them reasonable control over the specifics of the tenancy lease as a result. Please refer to my blog on commercial leasing for a more detailed discussion: Signing a Commercial Lease? How well do you know Your Rights and Responsibilities?.
In order to effectively prepare commercial leases, Howard Nightingale will:
Draw the lease
There are inexpensive “off the shelf” leases available for sale in stores and on the Internet. Some of them aren’t all that bad, and some are prepared for the Ontario market. Given a good tenant and no problems, these will often work fine. But these are limited in that they are ‘one-size fits all, documents’ and unfortunately, things don’t always go smoothly. In contrast, Howard Nightingale is completely familiar with the laws that apply in Ontario, and will take the time to become familiar with your specific requirements. The result is a tailor-made lease to protect you to the full extent of the law.
Review and Advise on the lease
Not every situation involves a new lease. You might have an agreement already in effect and need some advice due to a situation that has recently arisen, or you might have a lease in effect for many years and you simply want to check on its current, legal accuracy and effectiveness.
On the other hand, you might be the lessee: tenants also assume risk when they sign a lease; accordingly Howard Nightingale will ensure that the lease is fair, that it contains standard legal protection and doesn’t introduce anything that could compromise the lessee during the term that the lease is in effect. Having a solid legal opinion both protects lessees and gives them peace of mind.
Sub-search of title or additional searches and services provided related to the leased premises.
The Ontario Land Registry is now an up-to-date electronic database that provides a wealth of information. In addition to its use for property sales and purchases, it is an effective tool for leasing situations as well. When you lease, for example, you can be affected by any dispute involving the specific property. Therefore, you need to know that the owners listed on the lease are the actual owners, that there are no existing liens against the property, no existing sales to take place during your tenancy, and so on. This is why Howard Nightingale will do title searches even for leasing situations.
Draw up commercial leases including negotiations and all other services.
In summation, the flexibility of the Commercial Tenancies Act, 1990 allow both parties to negotiate a mutually satisfactory agreement; but to ensure that outcome, a close scrutiny of any leasing arrangement is necessary for both lessor and lessee.
Frequently Asked Questions
Some mall or office leases include a clause allowing the landlord to move your business to a different unit in the building to accommodate a larger tenant. This can be devastating for retail businesses that rely on specific foot traffic. A lawyer can help negotiate “comparable space” requirements or reimbursement for moving and renovation costs.
A landlord might be happy to rent you a space for a restaurant, but if the municipal zoning only allows for “Professional Offices,” you won’t be able to get a business license or building permits. It is the tenant’s responsibility to ensure the “Permitted Use” in the lease matches the local zoning by-laws.
Trade fixtures are items you installed for your business (like shelving, specialized lighting, or kitchen equipment). Generally, you can take these with you if they can be removed without damaging the building. However, “improvements” (like flooring or built-in walls) often become the property of the landlord. Your lease should clearly define what stays and what goes.
No. There is no automatic right to stay once your lease term ends. If you want the option to stay, a “Right to Renew” or “Option to Extend” must be negotiated into the original lease. These clauses usually require you to give written notice 6 to 12 months in advance, or the option lapses.
You do not have an automatic right to sublet or assign a commercial lease in Ontario unless it is explicitly stated in the contract. Most leases require the landlord’s “prior written consent,” and many specify that such consent “shall not be unreasonably withheld.” We ensure these exit strategies are drafted into your agreement from day one.
“Quiet Enjoyment” is a standard legal right that ensures the tenant can use the space for its intended purpose without substantial interference from the landlord. If the landlord’s renovations or actions make it impossible to conduct your business, they may be in breach of this covenant, even if the lease allows them to enter for repairs.
Yes. Under the CTA, if rent is unpaid for 15 days, a landlord has the right to re-enter the premises and change the locks without a court order, unless the lease specifies otherwise. They can also seize and sell your business inventory (distress) to recover the arrears. This is a “hair-trigger” power that makes legal review of default clauses essential.
Generally, the lease agreement dictates this. While landlords typically handle structural elements like the roof and foundation, the tenant is often responsible for everything “inside the four walls,” including HVAC systems, plumbing, and electrical. Without a clear “Schedule of Condition” at the start, a tenant could be forced to pay for expensive repairs to aging equipment.
TMI stands for Taxes, Maintenance, and Insurance. In a “Net” or “Triple Net” lease, the tenant pays a base rent plus their proportionate share of the building’s operating costs (TMI). It is critical to have a lawyer review how these are calculated to ensure you aren’t paying for the landlord’s capital improvements or structural repairs that should be their responsibility.
No. Unlike residential tenancies, which are governed strictly by the Residential Tenancies Act, commercial leases are governed by the Commercial Tenancies Act (CTA) and, primarily, the specific contract signed between the parties. In the commercial world, there is no “standard lease” form, and most of the consumer-style protections found in residential law do not apply.
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