Commercial Leases | By Lawyers
Skip to main content

Commercial Leases

ON

This publication guides practitioners in Ontario 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
Icon

2 Matter Plans Included

  • Item icon ALERTS - Nil
  • Item icon Full Commentary - Commercial Leases - Acting for the Landlord (ON)
  • 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 ...

    This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

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

    This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

  • 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 - Ontario
    • 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 a stipulated rent. The lease identifies the parties, describes the premises, establishes the commencement date, the duration of ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • Item icon Capacity to enter into a lease
      Party incorporated under the Business Corporations Act A party incorporated under the Business Corporations Act, R.S.O. 1990, c. B. 16 has a natural person’s capacity, rights, powers, and privileges: s 15 of the Act. A corporation can enter into a lease. However, the corporation must exercise ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

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

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • Folder icon If required - Agreement to lease
      • Item icon Agreement to lease
        An agreement to lease, offer to lease, and intention to lease are all terms used to describe a document recording an agreement to enter into a lease. This is commonly referred to as the preliminary document. A claim in equity may result in the court enforcing an agreement to lease as the lease if ...

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • 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 ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • 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.

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • 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 ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • 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 lender and non-disturbance agreements
        Without an agreement to the contrary, there is no legally binding relationship between the tenant of the premises and the landlord's lender. However, if the landlord defaults under its mortgage agreement with its lender, the lender may be entitled to take possession of the leased premises and ...

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • Item icon Letter to lender for consent to lease
      • Item icon Non-disturbance agreement
    • Folder icon If required - 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 ...

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • Item icon Statutory declaration
      • Item icon Clause - Statutory declaration of landlord - ON 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 Alterations by the tenant
      During the lease term, the tenant will likely want to make alterations to the premises. The tenant may want to personalize the premises to accommodate the type of business it operates or the needs of its employees. Therefore, the tenant may wish to negotiate with the landlord to include an ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • 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 ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • 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 ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • Item icon Letter to client with lease for signing
    • Item icon Registration of the lease
      Leases for terms that exceed three years, including option periods, should be registered to protect the lessee's interest. Section 111(4) of the Land Titles Act lists the documents requirements for registration as:

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • Item icon Register the lease – Teraview
  • Folder icon C. If required - Rent reviews, renewals, variation and extension
    • Folder icon Rent reviews
      • 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 ...

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • 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.

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • Item icon Lease extension agreement
      • Item icon Agreement to vary lease
      • Item icon Agreement to variation of lease - Deferral of rental payments
      • 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 ...

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • 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 ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • 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 ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • 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 Register an assignment of interest in a lease - Teraview
      • 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 Sublease
      • Item icon Sublease agreement
      • Item icon Consent to sublease agreement
      • Item icon Register a notice of sublease - Teraview
      • 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 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 ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • 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 ...

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • 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 to Tenant
        • Item icon Notice of breach of lease to tenant
        • Item icon Notice of relocation to tenant
        • Item icon Notice of termination under lease 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 the lease
      • Item icon Register a determination or surrender of lease - Teraview
      • Item icon Letter to client with signed agreement confirming registration of surrender
      • Item icon Letter to tenant returning security deposit
    • Folder icon Non-payment of rent
      • Item icon Non-payment of rent
        The tenant's failure to pay rent is classified as a monetary default. Under s 18(1) of the Commercial Tenancies Act, if rent remains unpaid for 15 days past the due date, it is lawful for the landlord to re-enter into the premises to repossess it and terminate the lease unless the lease ...

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • Item icon Obtaining possession
        Unless the lease includes the contrary intention, for monetary default, the landlord may repossess the property by changing the locks on the 16th day after rent is due without notice to the tenant: s 18(1). This terminates the lease. For non-monetary defaults, the landlord serves notice on the ...

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • Folder icon Notices for non-payment of rent
        • 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 of rent default to tenant
        • Item icon Notice of termination of lease for non-payment and change of locks to tenant
        • Item icon Notice of termination under lease to tenant
      • Folder icon If required - Distraint
        • Item icon Distraint
          Distraint is a self-help remedy where the landlord seizes the tenant's goods located on the leased premises to recover the amount owing for rent in arrears. This is also called distress. The remedy remains available while the landlord and tenant relationship continues under the lease. The ...

          This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

        • Item icon Notice to Tenant
        • Item icon Notice of 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 Notice of rent default to tenant
        • Item icon Letter to tenant with notice of default for non-payment of rent
        • 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:

        This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

      • Item icon Letter to other side with notice of breach
      • Item icon Notice of breach of lease to tenant
      • Item icon Letter to other side with notice of civil action for recission or damages
      • Item icon Notice of Application
      • Item icon Statement of Claim (Action Commenced by Notice of Action)
      • Item icon Statement of Claim (General)
      • Item icon Information for Court Use
      • Item icon Affidavit of Service
    • Item icon Removing the notice of lease from title
      The property owner may apply to the land registrar to remove the notice of lease from the title. If the lease is surrendered, an Application General for a Surrender of Lease is filed.

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

  • 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 ...

      This excerpt is a preview of the full publication. You can Subscribe Now and gain immediate access to the complete publication.

    • Item icon Letter to client finalizing commercial lease 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

Our Authors

A team of legal professionals contribute to By Lawyers' publications, all helping to ensure that content is updated regularly to reflect changes in legislation, practice, and procedure.
Meet Our Authors
Authors