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Commercial Leases

AB

This publication guides practitioners in Alberta through the negotiation and drafting of commercial leases, including provisions for subleasing, assignment, and termination.

2 Matter Plans

Overview

This commentary covers all aspects of commercial leasing, including negotiation, drafting, registration, renewals, assignments, subleases, termination, common disputes, and possible legal remedies.

The Reference materials folder includes guidance on electronic signing and remote witnessing, and the Getting the matter underway folder contains essential compliance and client engagement documents. The comprehensive Retainer Instructions ensure that all necessary information is gathered from the client at the outset of the matter.

Precedents in this publication include:

  • Agreements to lease;
  • Lease agreement;
  • Library of additional clauses for the lease;
  • Library of notices for various situations
  • Non-disturbance agreement
  • Assignment of lease
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2 Matter Plans Included

  • Item icon ALERTS - Nil
  • Item icon Full Commentary - Commercial Leases - Acting for the Landlord (AB)
  • Folder icon Reference materials
    • Item icon AI Prompts
    • Item icon Electronic Signing and Remote Witnessing
    • Item icon Further information
  • Item icon Overview
    The owner of real property may enter a contract with another party, transferring them the right to possession and enjoyment of the property in exchange for payment. This is called a lease. The property owner, or landlord, gives the tenant, or lessee, rights to the exclusive use of the property for ...

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  • Item icon Summary of the process
    The usual steps in a lease matter when acting for the landlord are:

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  • Folder icon A. Getting the matter underway
    • Item icon File cover sheet - Commercial leases
    • Item icon To do list - Commercial leases
    • Item icon First steps
    • Item icon Client details, verification, and source of funds
    • Item icon Retainer instructions - Commercial leases
    • Item icon Conflict of interest check
    • Item icon Initial letter to landlord client enclosing retainer agreement
    • Item icon Retainer agreement - Alberta
    • Item icon Scope of work - Commercial leases - Acting for landlord
    • Item icon Time and costs estimates
    • Folder icon If required - Costs disclosure update and a non-engagement letter
      • Item icon Letter to client updating costs disclosure
      • Item icon Non-engagement letter
    • Folder icon General deeds, agreements, execution clauses, and statutory declarations
      • Item icon Deeds and Agreements
      • Folder icon Deeds
        • Item icon Confidentiality deed
        • Item icon Deed for general use
        • Item icon Deed of assignment of agreement
        • Item icon Deed of gift
        • Item icon Deed of guarantee
        • Item icon Deed of release
        • Item icon General deed of indemnity
        • Folder icon Library of standard clauses for deeds
          • Item icon Amendment clause
          • Item icon Confidentiality clause for defined information - All parties
          • Item icon Confidentiality clause for defined information - One party
          • Item icon Confidentiality clause for terms of agreement - All parties
          • Item icon Confidentiality clause for terms of agreement - One party
          • Item icon Costs clause
          • Item icon Counterparts clause
          • Item icon Dispute resolution clause
          • Item icon Events beyond control clause
          • Item icon Governing law and jurisdiction clause
          • Item icon Interpretation clause
          • Item icon No assignment clause
          • Item icon Notices clause
          • Item icon Severance clause
          • Item icon Waiver clause
          • Item icon Whole agreement clause
      • Folder icon Agreements
        • Item icon Agreement for general use
        • Item icon Heads of agreement
        • Item icon Non-disclosure agreement - Formal
        • Item icon Non-disclosure agreement - Informal
        • Folder icon Library of standard clauses for agreements
          • Item icon Amendment clause
          • Item icon Confidentiality clause for defined information - All parties
          • Item icon Confidentiality clause for defined information - One party
          • Item icon Confidentiality clause for terms of agreement - All parties
          • Item icon Confidentiality clause for terms of agreement - One party
          • Item icon Costs clause
          • Item icon Counterparts clause
          • Item icon Dispute resolution clause
          • Item icon Events beyond control clause
          • Item icon Governing law and jurisdiction clause
          • Item icon Interpretation clause
          • Item icon No assignment clause
          • Item icon Notices clause
          • Item icon Severance clause
          • Item icon Waiver clause
          • Item icon Whole agreement clause
      • Folder icon Execution clauses
        • Item icon Execution clauses - Agreements and contracts
        • Item icon Execution clauses - Deeds
      • Folder icon Statutory declaration
        • Item icon Statutory declaration
      • Item icon Standard annexure note for documents
  • Folder icon B. The lease
    • Item icon The lease
      The lease is the contract between the landlord and the tenant transferring the right of possession and exclusive use of the premises for a defined period in exchange for rent. The lease identifies the parties, describes the premises, establishes the commencement date, the duration of the lease, the ...

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    • Item icon Capacity to enter into a lease
      Party incorporated under the Business Corporations Act A party incorporated under the Business Corporations Act, RSA 2000, c B-9 is a separate legal entity with a natural person’s capacity to enter into a lease. The corporation must exercise its authority through proper corporate action, such as by ...

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    • Item icon Initial considerations
      Some important initial considerations for a lease agreement are:

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    • Folder icon If required - Agreement to lease
      • Item icon Agreement to lease
        An agreement to lease, agreement for lease, offer to lease, and intention to lease are all terms used to describe a document recording the parties’ intention to enter a lease. They are used as a basis for negotiation of the essential terms such as rent amount and duration of the lease. A claim in ...

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      • Item icon Agreement to lease - General
      • Item icon Agreement to lease - Major construction
    • Item icon Formality
      Validity To be considered valid, a lease must identify the parties, provide a description of the premises to be leased, set out the commencement date, duration of the term, amount of rent and its payment method, be signed by the parties, and detail any conditions or covenants applicable to the ...

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    • Item icon Terms of the lease
      Parties The lease agreement must include the landlord’s and tenant’s full legal names. The lease also names any guarantors.

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    • Item icon Guarantors and security deposits
      Guarantors A landlord often requires the tenant to provide a guarantor for the lease. A guarantor is a party who makes a collateral promise to be responsible for the debt of another if the primary debtor falls into default. This is especially common for corporate tenants when landlords require a ...

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    • Item icon Lease agreement
    • Folder icon If required - Library of clauses
      • Item icon Amendments
      • Item icon Assignment of rights and obligations
      • Item icon Business days
      • Item icon Cleaning services
      • Item icon Continuous operation
      • Item icon Covenants protecting lender's interests
      • Item icon Cumulative remedies
      • Item icon Delayed possession
      • Item icon Demolition and relocation
      • Item icon Entire agreement
      • Item icon First right of refusal
      • Item icon Go dark and recapture rights
      • Item icon Legal fees in case of dispute
      • Item icon Limitation of liability
      • Item icon Liquor sales licence - Application
      • Item icon Liquor sales licence - Landlord's consent
      • Item icon Liquor licence - Transfer
      • Item icon Option to purchase for a fixed amount
      • Item icon Option to purchase for market value
      • Item icon Parking
      • Item icon Parking - Public parking lot
      • Item icon Right of renewal
      • Item icon Signage restrictions
      • Item icon Surrender of premises
      • Item icon Time is of the essence
      • Item icon Turnover rent
    • Folder icon If required - Lender
      • Item icon Landlord’s role in a sublease or assignment
        The landlord’s consent is essential to the enforceability of a sublease or assignment of the lease. Virtually all leases include a covenant prohibiting a sublease or assignment either absolutely or without the landlord’s prior written consent. If the lease allows a sublease or assignment but ...

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      • Item icon Letter to lender for consent to lease
      • Item icon Non-disturbance agreement
    • Folder icon Option to purchase
      • Item icon Option to purchase and right of first refusal
        An option to purchase provides the tenant the right to purchase the leased premises during the lease term, subject to certain conditions. Most options to purchase stipulate that the tenant is only permitted to exercise the option to purchase if the tenant is not in breach of the lease. However, it ...

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      • Item icon Statutory declaration
      • Item icon Clause - Statutory declaration of landlord - Confirming option to purchase given to tenant
    • Item icon Letter to client with draft lease and advice
    • Item icon Enclosure - Advice to parties reviewing a lease
    • Item icon Letter to tenant's lawyer submitting the lease
    • Item icon Proposing changes to the lease
      While negotiating a lease agreement, the tenant may request that the landlord change the proposed lease to eliminate extra costs or use restrictions, add tenant inducements, or improve the renewal conditions. Depending on the tenant’s needs, the request for changes could involve a variety of new ...

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    • Item icon Letter to client with requests for amendment
    • Item icon Letter to client with revised lease for approval
    • Item icon Letter to tenant's lawyer responding to amendments
    • Item icon Signing and original lease
      Leases are signed in duplicate, so both the landlord and the tenant have an original version. Additional originals may be executed for an additional party, such as a guarantor. The lease serves both parties as confirmation that there is a contract. The tenant relies on the lease to establish and to ...

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    • Item icon Letter to client with lease for signing
    • Item icon Registration of the lease
      Leases for terms that exceed three years should be registered to protect the lessee’s interest. Leases over three years must be in the prescribed form to be registered with the Land Titles and Surveys Alberta (LTSA): s 95.

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    • Item icon Land Titles – Government of Alberta
    • Item icon Spatial Information System – Government of Alberta
    • Item icon Lease
    • Item icon Affidavit of Attestation of an Instrument
    • Item icon Letter to Land Titles Office with lease for registration
  • Folder icon C. If required - Rent reviews, renewals, variations and extension
    • Folder icon Reviewing rent
      • Item icon Reviewing rent
        The lease determines when and how the amount of rent payable can be reviewed. If there is no written lease agreement, there is potentially no limit to how often or by how much a landlord could increase the rent payable. An escalation clause allows the landlord to increase rent from the tenant ...

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      • Item icon Letter to tenant advising of CPI rent increase
      • Item icon Letter to tenant advising of fixed percentage rent increase
      • Item icon Letter to tenant advising of fixed amount rent increase
    • Folder icon Extension and variation
      • Item icon Right to extend
        An option to extend a lease allows the tenant to extend the term, leaving the original lease intact without requiring a new lease to be signed. This is different from the option to renew a lease, which, when exercised, surrenders the original lease and creates a new lease in its place.

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      • Item icon Agreement to vary lease
      • Item icon Agreement to variation of lease - Deferral of rental payments
      • Item icon Lease extension agreement
      • Item icon Letter to client with agreement to vary the lease
      • Item icon Letter to other side's lawyer enclosing agreement to vary the lease
      • Item icon Letter to other side's lawyer enclosing signed agreement to vary the lease
      • Item icon Letter to client with signed agreement confirming registration of variation
    • Folder icon Renewal
      • Item icon Right to renew
        A lease may include a right to renew that, if exercised, operates to surrender the original lease and create a new lease in its place. As there is no statutory right to renew a commercial lease, the option to renew is contractual and strictly governed by the terms of the lease. The right to renew ...

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      • Item icon Letter to tenant regarding option to renew
      • Item icon Letter to tenant offering a new lease on expiry of term
  • Folder icon D. If required - Change of parties
    • Item icon Change of parties
      As a lease is fundamentally a contract between the landlord and the tenant, the normal rules of privity of contract apply. However, since a lease relates to real estate, rights arising from property law may result in the lease affecting more than just the parties to the contract. The property ...

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    • Item icon Sublease or assignment
      If a tenant is unwilling or unable to continue with their lease obligations, and if the lease allows for it, the tenant may wish to sublet or assign the lease to another tenant. By subletting or assigning the lease, the tenant avoids the financial consequences of ending the lease early or falling ...

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    • Folder icon Sublease
      • Item icon Sublease agreement
      • Item icon Consent to sublease agreement
      • Item icon Letter to head landlord's lawyer enclosing sublease and consent
      • Item icon Letter to client with draft lease and advice
      • Item icon Enclosure - Advice to parties reviewing a lease
      • Item icon Letter to tenant's lawyer submitting the lease
      • Item icon Letter to client with requests for amendment
      • Item icon Letter to client with revised lease for approval
      • Item icon Letter to tenant's lawyer responding to amendments
      • Item icon Letter to client with lease for signing
    • Folder icon Assignment
      • Item icon Assignment of lease
      • Item icon Letter to assignor's lawyer enclosing assignment
      • Item icon Letter to assignee's lawyer enclosing copy of documents
      • Item icon Letter to client enclosing assignment documents for execution
      • Item icon Letter to assignee's lawyer enclosing completed assignment
      • Item icon Letter to assignor's lawyer enclosing completed assignment
      • Item icon Letter to client enclosing completed assignment documents
  • Folder icon E. If required - Disputes and termination
    • Item icon Common disputes
      Disturbance A landlord cannot carry out alterations or refurbishments to the premises unless the lease allows for this type of disturbance and the work is completed in compliance with the lease terms. When an emergency necessitates the alterations or refurbishment of the premises, the tenant is to ...

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    • Folder icon Early termination
      • Item icon Ending the lease early
        There are many reasons why either party may wish to terminate the lease before the expiry of its term. If the parties mutually agree, the lease may be terminated at any time, with or without conditions. Unless the lease includes a term allowing the tenant the right to end the lease early without ...

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      • Item icon Agreement to terminate lease
      • Item icon Letter to client with agreement to terminate the lease
      • Folder icon Library of notices
        • Item icon Notice of breach of lease to tenant
        • Item icon Notice of relocation to tenant
        • Item icon Notice of rent default to tenant
        • Item icon Notice of termination under lease to tenant
        • Item icon Notice of termination of lease for non-payment and change of locks to tenant
        • Item icon Notice of termination and to vacate to tenant
        • Item icon Notice of termination for demolition to tenant
        • Item icon Letter to other side serving notice
      • Item icon Letter to other side's lawyer enclosing agreement to terminate the lease
      • Item icon Letter to other side's lawyer enclosing signed agreement to terminate lease
      • Item icon Letter to client with signed agreement confirming registration of surrender
      • Item icon Land Titles – Government of Alberta
      • Item icon Spatial Information System – Government of Alberta
      • Item icon Discharge
      • Item icon Surrender of Lease
      • Item icon Affidavit of Attestation of an Instrument
      • Item icon Letter to tenant returning security deposit
    • Folder icon Non-payment of rent
      • Item icon Non-payment of rent
        A tenant who fails to pay rent faces legal remedies, including re-entry and termination of the lease, distraint, and a claim for rent in arrears. Leases typically stipulate what circumstances amount to an event of default and the consequences to it. Often an event of default includes the ...

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      • Item icon Obtaining possession
        Many commercial lease contain a clause permitting the landlord the right to re-enter and repossess the premises if the tenant defaults in the payment of rent. The clause may or may not impose notice requirements on the landlord before they exercise their right to re-enter and repossess the ...

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      • Item icon Notice of rent default to tenant
      • Item icon Letter to tenant with notice of default for non-payment of rent
      • Item icon Letter to guarantor enclosing copy of notice of default
      • Item icon Notice to terminate lease for non-payment and change of locks to tenant
    • Folder icon If required - Distraint
      • Item icon Distraint
        The remedy of distraint, also called the common law right of distress, is a self-help remedy exercised by a landlord to seize the personal property of a tenant to satisfy amounts owing for rent in arrears. If the lease agreement states that other charges can be collected as rent, for example taxes, ...

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      • Item icon Notice to distress to tenant - Seizure of goods and requesting payment
      • Item icon Notice of distress to tenant - Time and place of sale of goods
      • Item icon Statutory declaration
      • Item icon Clause - Statutory declaration of subtenant - Destraint
    • Folder icon Remedies for breach
      • Item icon Remedies for breach
        A lease is a contract between the parties. When the terms of a contract are not met, the remedies available to the innocent party will depend on the type of term that was breached. The terms of a contract will fall into one of three types:

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      • Item icon Letter to other side with notice of breach
      • Item icon Letter to other side with notice of civil action for rescission or damages
    • Item icon Removing the lease from title
      The parties can apply to the Land Titles Office to remove a lease that is registered on title. Pursuant to s 100 of the Land Titles Act the tenant may complete the Form 14 to surrender the lease in favour of the registered owner. The Registrar in receipt of the surrender makes a ...

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  • Folder icon F. Finalizing the matter
    • Item icon Finalizing the matter
      It can be helpful to foster professional relationships, as business clients often require ongoing legal advice and support. Lawyers further develop a loyal client base by establishing a strong working relationship with them. Original documents not delivered to the client should be placed in safe ...

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    • Item icon Letter to client finalizing the matter
    • Item icon Invoice recital - Commercial leases - Acting for the landlord
    • Item icon Closing the file
    • Item icon File closing checklist
  • Item icon Comments and suggestions for By Lawyers

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