Signing a commercial lease in Toronto is one of the most consequential commitments your business will make. Unlike residential tenancies, Ontario law provides almost no automatic protections for commercial tenants, the lease itself is the governing document, and every clause you agree to today will bind your business for five, ten, or more years. At Hadri Law, our Toronto commercial leases lawyers help business owners and landlords negotiate, draft, and review lease agreements that protect their interests from the first term through every renewal.
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Commercial Lease Law in Ontario
Ontario's Commercial Tenancies Act (R.S.O. 1990, c. L.7) sets out the basic legal framework governing landlords and commercial tenants, but it does far less than most business owners expect. The Act does not cap rent increases, does not establish maintenance obligations, and does not guarantee tenants the right to renew. What it does establish is a default set of rules that apply only when the lease itself is silent, and a well-drafted lease will override most of those defaults.
This matters enormously in Toronto's market. Retail rents in certain parts of the city have risen dramatically in recent years. Downtown Toronto office vacancy was approximately 13% at the end of 2025, down from a peak of around 14.8% in mid-2024, conditions that are beginning to shift negotiating power back toward landlords in some segments. GTA industrial lease rates have also been declining, creating opportunities for industrial tenants to negotiate better terms.
Nassira El Hadri, Hadri Law's founder and principal lawyer, brings an unusual perspective to commercial lease work. Before founding the firm, she advised banks and credit unions on commercial financing transactions, which means she has seen, repeatedly, how poorly drafted commercial leases create downstream problems for business financing, business sales, and asset valuations. Nicholas Dempsey, Hadri Law's corporate lawyer, has worked on more than 90 asset and share sale transactions and understands that a lease is not just a tenancy agreement: it is a business asset that can either enhance or significantly diminish your company's value.
Types of Commercial Leases in Ontario
Understanding which type of lease you are being offered is the foundation of any lease review or negotiation.
Gross Lease (Full-Service Lease)
The landlord covers most operating expenses, property taxes, building insurance, and common area maintenance, and the tenant pays a single base rent. Gross leases are simpler to budget but typically carry higher base rents to compensate the landlord for bearing those costs. Watch for exclusions hidden in the fine print that shift specific costs back to the tenant.
Net Lease (Single, Double, or Triple Net)
Net leases come in three forms: single net (tenant pays base rent plus property taxes), double net (taxes and building insurance), and triple net, the NNN lease, where the tenant pays base rent plus all three: property taxes, insurance, and operating/maintenance costs. Triple net leases are common in retail and industrial settings and can look attractive on paper because base rents are lower, but the total occupancy cost often exceeds a comparable gross lease.
Before signing a net lease, model your total annual cost, base rent plus estimated operating costs, over the full lease term. A lawyer and your accountant should both review the numbers.
Percentage Lease
Common in high-traffic retail centres, a percentage lease adds a percentage of the tenant's gross revenue on top of base rent, typically once sales exceed a defined threshold. These leases require careful definition of what counts as "gross revenue" and what exclusions apply.
Modified Gross Lease
A hybrid structure where base rent covers some but not all operating costs, with specific categories shared between landlord and tenant by agreement. The devil is in the drafting: ensure every cost category is allocated explicitly.
Commercial Lease Review: What Our Lawyers Check
Every commercial lease review we conduct goes beyond confirming the basic terms. Our lawyers examine the clauses that create long-term risk, the ones that are difficult or costly to renegotiate once you are in the tenancy.
Rent structure and escalation clauses, Is rent fixed for the term, or does it escalate annually? Escalation clauses may tie increases to a fixed percentage, to the Consumer Price Index (CPI), or to landlord discretion at renewal. Uncapped escalation tied to landlord discretion is a red flag, particularly given recent market volatility in Toronto. CPI-indexed increases became somewhat more tenant-friendly as inflation slowed in 2024–2025.
Common Area Maintenance (CAM) charges, In net and modified gross leases, CAM charges cover shared building expenses: cleaning, landscaping, security, and often much more. We review whether CAM definitions are sufficiently specific, whether annual increases are capped, and whether tenants have a right to audit operating cost statements. Capital improvements are a particular concern, a landlord who classifies a roof replacement as an operating cost is effectively shifting capital expenditure to the tenant.
Personal guarantees, When a corporation signs a commercial lease, the landlord often requires personal guarantees from the directors or principals. An unlimited personal guarantee without a sunset clause or cap can expose you personally to years of rent obligations even after the corporation ceases operations. We negotiate guarantees with time limits, dollar caps, and carve-outs for circumstances beyond the guarantor's control.
Assignment and subletting rights, Under the Commercial Tenancies Act, tenants may sublet or assign their lease unless the lease itself prohibits it. In practice, most commercial leases do restrict assignment and subletting without landlord consent. This becomes critical when you sell your business: a buyer may not be willing to proceed if they cannot assume the lease. We negotiate deemed consent provisions, reasonable-consent standards, and clean transfer mechanisms as part of our standard lease review.
Permitted use and exclusivity, A narrow permitted use clause can prevent you from expanding your product or service offering. If you're in a multi-tenant building or complex, an exclusivity clause, the landlord's promise not to lease nearby space to a direct competitor, is important for retail and food service businesses.
Renewal options, A renewal option is only as valuable as its terms. How much notice is required to exercise it, and by what date? What rent applies on renewal, market rate, a fixed formula, or landlord discretion? Renewal options that are ambiguous, require unreasonably early notice, or reset rent to market without a cap may provide less protection than they appear to offer.
Exit and early termination rights, Commercial leases do not automatically provide exit rights. Without an express early termination clause, you may owe the full remaining rent even if your business circumstances change fundamentally. Early termination provisions typically require six to twelve months' notice and a penalty payment, but that is far better than years of unmitigated rent exposure.
Maintenance and repair obligations, The Commercial Tenancies Act does not allocate maintenance responsibilities; that is left entirely to the lease. Ambiguity about who is responsible for HVAC systems, structural repairs, or plumbing can produce expensive disputes. Our lawyers ensure these responsibilities are defined clearly before you sign.
Leasehold improvements, Who funds the fit-out? If the landlord is providing a tenant improvement (TI) allowance, under what conditions? What happens to improvements at the end of the lease, do they stay, or must they be removed at the tenant's cost? Removal obligations for fixtures or specialized improvements can be significant.
Call (437) 974-2374 to discuss your lease before you sign.
Commercial Lease Negotiation in Toronto
Most landlords describe their lease as "standard." It is not. The majority of commercial lease provisions in Ontario are negotiable, including terms that many tenants assume are fixed.
Effective negotiation begins at the Letter of Intent (LOI) stage, before the formal lease is drafted. Key economic terms, base rent, lease term, renewal options, tenant improvement allowances, and rent-free periods during buildout, should be locked down in the LOI. Once these terms are agreed to in principle, they are harder to revise in the formal lease process. We recommend legal review of the LOI, not just the final document.
For tenants, our primary negotiation targets include:
- Rent-free period during buildout or the initial months of the tenancy
- Tenant improvement allowance from the landlord, and the conditions under which it is paid
- CAM charge caps, a maximum annual percentage increase, typically 3–5%, with audit rights
- Assignment rights structured to accommodate a future business sale without landlord consent being unreasonably withheld
- Personal guarantee limitations, a sunset clause, a dollar cap, or exclusion of liability for circumstances beyond your control
- Defined early termination right with a clear penalty formula rather than open-ended liability
- Renewal option rent formula, a fixed increase, CPI-indexed rate, or market rate with a cap
For landlords, we draft and negotiate leases that protect the property owner's investment: clearly defined use restrictions, landlord remedies for default, distress rights, estoppel certificate provisions, subleasing consent frameworks, and lease assignment protocols aligned with property financing requirements.
Nassira's background advising lending institutions means she understands what lenders require in commercial leases when a property owner is financing against a tenanted asset, a perspective that helps our landlord clients structure leases that are both commercially sound and financing-compatible.
Commercial Lease Drafting for Landlords and Property Owners
Property owners leasing commercial space across Toronto and the GTA need documentation that is precise, enforceable, and aligned with the realities of property management and financing. A poorly drafted lease creates ambiguity that often resolves in the tenant's favour in litigation.
Our commercial lease drafting services include full lease agreements for retail, office, industrial, and mixed-use properties; subleases and assignments; lease amendments and extensions; estoppel certificates; landlord consent documentation; and lease surrender agreements.
For landlords with multiple tenants, we pay particular attention to use clause specificity, vague permitted use language creates ongoing disputes about what a tenant can do on the premises, and to consistency across lease documents so that the property's lease portfolio does not expose the owner to conflicting obligations. Distress provisions deserve particular care: under the Commercial Tenancies Act, a landlord may seize and sell a tenant's property for unpaid rent (distress) or change the locks on the 16th day after rent is due, but not both. The Act's distress provisions must be reflected accurately in the lease, and our lawyers ensure they are.
Laws Governing Commercial Leases in Ontario
Commercial Tenancies Act, R.S.O. 1990, c. L.7
Ontario's primary commercial tenancy legislation. It establishes default rules for the landlord-tenant relationship, including distress procedures, assignment, and termination, but signed lease agreements generally override it. The Act provides far fewer automatic tenant protections than the Residential Tenancies Act: there is no rent control, no mandatory maintenance obligation on landlords, and no automatic right to renew. Source: ontario.ca/laws/statute/90l07
Contract Law (Common Law)
Commercial leases are contracts. Standard contract law principles apply: offer, acceptance, consideration, and the remedies of breach, repudiation, and specific performance. Misrepresentation claims can arise where a landlord or agent made material representations during negotiations that are not reflected in the final lease.
Ontario Business Corporations Act (OBCA) and Personal Guarantees
When a corporation enters a lease, it is the corporation, not the individual principals, that is legally bound, unless a personal guarantee is given. Landlords routinely require guarantees precisely because a corporation can dissolve. Under the OBCA, incorporation provides limited liability protection that a personal guarantee contractually removes. Negotiating the scope of that guarantee is among the most important things a commercial lease lawyer does for incorporated business owners.
Bankruptcy and Insolvency Act (BIA) / CCAA
In insolvency proceedings, commercial leases are treated as executory contracts. Under the Bankruptcy and Insolvency Act, a debtor or trustee may give notice to disclaim a lease; under the Companies' Creditors Arrangement Act, a monitor can facilitate lease restructuring as part of the CCAA process. Landlords should understand these provisions when evaluating the creditworthiness of prospective tenants; tenants in financial difficulty should understand their options before defaulting.
Toronto Zoning By-Law
The permitted use clause in a lease is only meaningful if the specified use is actually permitted at the location under Toronto's Zoning By-law 569-2013. Confirming zoning compliance before signing matters. A lease that permits use that zoning prohibits creates a legal conflict that can be costly to resolve, and the tenant bears the risk of operating in violation of the municipal by-law.
Serving Toronto and GTA Commercial Tenants and Landlords
Our office is at First Canadian Place, 100 King Street West in Toronto's Financial District, one of Canada's most recognized commercial addresses. We serve businesses negotiating leases across the GTA: downtown Toronto, Midtown, North York, Mississauga, Oakville, Burlington, Hamilton, Vaughan, and Markham.
For international businesses establishing Canadian operations, from European companies entering the North American market to Latin American firms seeking a Toronto base, our ability to conduct all aspects of commercial lease review and negotiation in English, French, Spanish, and Catalan removes the communication friction that can slow deals and obscure important terms. It is one of the reasons Hadri Law's secondary tagline is "Your bridge to the North American, European, and African markets."
Frequently Asked Questions About Commercial Leases in Ontario
Do I need a lawyer to sign a commercial lease in Ontario?
There is no legal requirement, but for any lease over three years or $5,000 per month, legal review is strongly recommended. Ontario provides no rent control or automatic renewal rights for commercial tenants, the lease is what governs. A review typically costs $400–$3,000 depending on complexity, which is modest relative to a multi-year commitment.
How long does a commercial lease typically last in Ontario?
Commercial leases in Ontario typically run three to five years with renewal options, though retail and anchor tenant leases may run five to ten years. Shorter terms offer flexibility but often bring higher base rents. Longer terms can lock in favourable rates but require careful early termination and renewal clause negotiation to preserve exit options.
Can a landlord increase rent during a commercial lease in Ontario?
Not during a fixed-term lease, unless the lease explicitly permits mid-term increases. At renewal, however, there is no rent control for commercial properties in Ontario, landlords can set any renewal rent. Negotiating a fixed formula or cap for renewal rents protects tenants from unconstrained market-rate resets at the end of each term.
What is a triple net (NNN) lease?
In a triple net lease, the tenant pays base rent plus all three major operating cost categories: property taxes, building insurance, and maintenance costs. Base rents are typically lower, but total occupancy costs can exceed a comparable gross lease. Tenants should model the full annual cost, base rent plus estimated operating costs, before comparing options.
What are CAM charges and can they be negotiated?
Common Area Maintenance (CAM) charges cover shared building expenses, cleaning, landscaping, security, property management fees. They are almost always negotiable. Tenants should push for an annual increase cap (typically 3–5%), exclusion of capital improvements from the CAM pool, and a right to audit the landlord's operating cost statements.
What happens to my commercial lease if I sell my business?
Most commercial leases restrict assignment to a buyer without landlord consent. Stringent assignment restrictions can block or complicate a business sale. Negotiating deemed-consent provisions and conditions for releasing personal guarantee obligations upon assignment are far easier to address when the lease is first signed than at the time of sale.
Can a commercial landlord change the locks in Ontario?
Under the Commercial Tenancies Act, a landlord may change the locks on the 16th day after commercial rent was due and unpaid, or seize and sell the tenant's property (distress), but not both. If a landlord locks out a tenant unlawfully or exercises distress improperly, the tenant may have remedies including injunctive relief from the court.
Is a letter of intent for a commercial lease legally binding?
It depends on how it is drafted. A letter of intent (LOI) or agreement to lease may be binding in whole or in part depending on its language. An LOI that locks in key economic terms, rent, term, TI allowance, can create enforceable obligations before the formal lease is signed. Legal review of the LOI, not just the final lease, is strongly recommended.
Sources & Official Resources
Ontario Statutes Cited
- Commercial Tenancies Act, R.S.O. 1990, c. L.7, Primary legislation governing commercial landlord-tenant relationships in Ontario
- Renting a Commercial Property in Ontario, Ontario Government, Official summary of CTA provisions including distress, lock changes, and rent rules
Federal Statutes Cited
Municipal Regulations
Contact a Toronto Commercial Leases Lawyer Today
Whether you are reviewing your first commercial lease, renewing a long-standing tenancy, or drafting agreements for your investment property, Hadri Law provides the experience and focused attention that Toronto business owners and landlords need. Our lawyers serve clients across the GTA in English, French, Spanish, and Catalan, making us particularly well positioned for international businesses establishing a Canadian presence.
Call (437) 974-2374 for a free consultation.
First Canadian Place, 100 King Street West, Suite 5700, Toronto, ON M5X 1C7
This page provides general information about commercial lease law in Ontario and is not legal advice. Every lease situation is different. Contact a lawyer to discuss your specific circumstances.
