Check the lease term and renewal options. Most leases run 3–10 years, but retail spaces may go up to 5–10 years. Confirm start and end dates, plus conditions for early termination if needed.
Understand rent details clearly. Base rent is per square foot yearly, often $15–$60 in Ontario. Check additional costs like property taxes or maintenance fees. Audit these charges since overcharging happens often.
Things To Look For When Reviewing A Commercial Lease In Ontario
Pay attention to key details in the lease before signing. Missing or unclear clauses can lead to problems later.
Accurate identification of landlord, tenant, and leased premises
Confirm the legal names of the landlord, tenant, and guarantors. Conduct corporate searches if needed to avoid errors. Match the premises description with legal title, survey plans, and actual occupancy.
Check for rights to use shared areas like parking lots or hallways. Ensure these rights are clearly stated in the lease. Review rent rolls for accuracy with all tenancies and amounts listed correctly.
Clear lease term, renewal options, and early termination clauses
A clear lease term, renewal options, and early termination clauses are key parts of a commercial lease. These terms affect your rights and costs long-term.
- Lease terms often range from 3 to 10 years. Retail spaces typically run between 5 to 10 years, while office leases last about 3 to 5 years.
- Renewal options should specify multiple periods like two additional five-year terms. Leases must include clear notice requirements, usually six to twelve months before the term ends.
- Early termination clauses may allow tenants to break the lease at certain times without huge penalties. Examples include reduced fees for breaking the lease after several years or allowing subleasing rights.
- Start dates can vary but should be clear in the contract. It might start on a fixed date, when permits are approved, or after landlord work is completed. Some contracts offer rent-free build-out time as well.
- Contracts may include a “right of first refusal” on nearby space during renewals, giving tenants priority if new areas open up.
- Tenants can negotiate termination options if landlords fail their duties repeatedly.
Detailed breakdown of base rent, additional rent, and operating costs
Base rent, additional rent, and operating costs are crucial to understand in commercial leases. Each has unique elements that impact your financial responsibilities.
| Category | Description | Key Details |
|---|---|---|
| Base Rent | Fixed annual cost for leasing the premises. | – Calculated per square foot per year. – Typically ranges from $15 to $60 per sq ft in Ontario. – Includes usable and common area square footage. – Rentable square footage may increase costs by 15–25% compared to usable space. |
| Additional Rent | Shared costs for property operations and management. | – Covers property taxes, insurance, utilities, common area maintenance (CAM), snow removal, and landscaping. – Includes management fees and marketing expenses for retail spaces. – May include hidden fees like signage, parking, or after-hours HVAC. – Audit rights for operating costs can reveal errors or overcharges. |
| Operating Costs | Variable expenses for maintaining the property. | – Costs may escalate yearly per CPI, fixed increases, or market rate reviews. – Possible caps exist for controllable cost increases. – Review calculation methods and ensure transparency. – Verify exclusions to avoid unexpected charges. |
Permitted use of premises and exclusive use protection
Ensure the lease allows your business activities. Broad use clauses provide flexibility for future changes. Check if zoning rules align with your planned operations.
Exclusive use clauses stop landlords from renting to competitors in nearby spaces. This protects your customer base and reduces direct competition.
Maintenance, repair, and improvement responsibilities
The lease must define who handles repairs and maintenance. Landlords usually manage structural repairs, major systems like HVAC or plumbing, and upkeep of common areas. Tenants often take care of routine maintenance inside their space.
Check if responsibilities include costs for accessibility upgrades under AODA. Understand restoration duties at the lease end, such as removing improvements or meeting wear-and-tear standards.
Confirm ownership details for fixtures to avoid disputes later.
Subletting, assignment rights, and restrictions
Subletting lets you lease part or all of your space to others. Assignment transfers the entire lease to a new tenant. In both cases, the landlord’s consent is usually required but cannot be unreasonably withheld.
Landlords often have 15–30 days to respond.
Transfers to affiliated entities, such as during mergers or business sales, are generally allowed without approval. Profit-sharing clauses may apply if subleasing or assigning for more money than paid rent.
Recapture rights allow landlords to take back the space; these should exclude partial subleases and affiliates and ensure improvements are compensated. After assignment, liability should shift fully to the assignee once terms are met.
Clear rules help avoid disputes over control changes or profit definitions in leases.
Insurance requirements and risk allocation
Commercial General Liability insurance between $2–$5 million is often required. Tenants must also carry property insurance for improvements and personal belongings.
Business interruption coverage helps if unforeseen events stop operations. Certificates of insurance should list minimum coverage, deductibles, and insurer standards. Workers’ compensation insurance is mandatory by law.
Mutual waivers prevent insurers from suing the other party after paying claims. Indemnity terms should protect both sides while excluding landlord negligence. Environmental risks caused by tenants need limits; landlords must reveal pre-existing issues and cover related liabilities.
Remedies for default, dispute resolution, and termination provisions
Default clauses explain what happens if someone breaks the lease rules. They protect both landlords and tenants in case of problems.
- Monetary default covers unpaid rent or other missed payments. Non-monetary default includes breaking lease terms, like improper use of the space.
- Cure periods allow time to fix issues. Tenants usually get 5–10 days for monetary defaults and 15–30 days for non-monetary ones, depending on complexity.
- Landlords can use remedies like re-entry, repossession, termination, rent acceleration, or claiming damages. They may also enforce guarantees.
- Tenants may use remedies like self-help for urgent repairs, rent abatement, or ending the lease if landlord issues are ongoing.
- Distress lets landlords seize tenant goods to recover unpaid rent but must follow strict rules.
- Dispute resolution options include mediation or arbitration. Some leases require landlords and tenants to pay their own legal fees unless stated otherwise.
- Force majeure clauses explain situations that might pause obligations temporarily. These could involve natural disasters or emergencies affecting performance under the lease.
How Hadri Law Professional Corporation Can Protect Your Interests
Legal professionals ensure your lease follows Ontario rules. They explain rights, risks, and terms to protect your business.
Contracts are reviewed for clear terms on rent, repairs, termination clauses, and risk sharing. Lawyers help avoid costly mistakes by negotiating better terms and spotting hidden issues.
Conclusion
Signing a commercial lease in Ontario needs careful thought. Each point in the contract can affect your business for years. Review every detail, from costs to responsibilities. For help protecting your interests, trust Hadri Law by reaching out for a no-cost consultation to explore your business legal needs. Call 437-974-2374 or send an email to contact@hadrilaw.com to get started.