Commercial Lease Review in Ontario: What to Watch For

Commercial Leases: Heavily Negotiated, Not Standard Forms

Unlike residential leases in Ontario (heavily regulated by the Residential Tenancies Act), commercial leases are governed primarily by contract law. There is no rent control, no standard form, and significantly fewer tenant protections. This means that what you sign is (mostly) what you get — making pre-signing legal review critical.

Rent and Rent Increases

Commercial leases often use a "net" or "gross" rent structure. In a gross lease, you pay one flat amount covering rent, taxes, and operating costs. In a net lease (more common in Ontario commercial leasing), you pay base rent plus your proportionate share of property taxes, maintenance, and insurance (TMI). Operating costs can be significant and are often not capped.

Personal Guarantees

Landlords almost universally require the principal shareholders or owners of a tenant corporation to personally guarantee the corporation's obligations under the lease. This means your personal assets are at risk if the business fails. Negotiating to limit the guarantee is an important goal.

Assignment and Subletting

Commercial leases typically restrict assignment of the lease or subletting without the landlord's consent. If you intend to sell the business, the lease will typically need to be assigned to the buyer — understand these restrictions in advance.

Renewal Options

Negotiate clear renewal options with defined rent for the renewal term (or a defined mechanism for calculating rent). Without a renewal option, the landlord can demand a significantly higher rent or refuse to renew when your initial term expires.

Importance of Legal Review

A commercial lease is a major financial commitment — often 5–10 years with significant personal liability. Always have a lawyer review the lease before signing.