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Before signing an Ontario commercial lease, check the full cost of the space, whether you can use it as planned, and what happens if you want to renew, sell the business or leave. Look at who pays for renovations and major repairs, when rent starts, and whether the landlord is asking for a personal guarantee.
This guide is for business tenants reviewing an offer or draft lease for a shop, office or industrial unit. Ontario’s residential tenancy rules generally do not apply to commercial leases. The terms you agree to and Ontario’s Commercial Tenancies Act both matter.
Key takeaways
- Budget beyond base rent. Additional rent, utilities, fit-out work and repairs can change what the space costs.
- Check whether the space works for your business. The lease must allow the proposed use, and you may need separate municipal approvals.
- Look past the opening date. Renewal terms, transfer restrictions and guarantees can affect your options years after signing.
If you have an offer deadline, a possession date or a planned opening, include it in your inquiry. We check conflicts and availability and explain the consultation scope and any fee before you book. An inquiry does not retain the firm or confirm that we can meet a deadline.
Illustrative image of a commercial unit. It does not depict a property involved in a Legal Route matter.
Can an offer to lease commit your business?
An accepted offer to lease can create obligations before the parties sign the longer lease. Whether it does depends on what the parties agreed to, their intention and any conditions in the document. The title “letter of intent” or “offer to lease” does not settle whether it binds you.
Review the offer and the proposed lease together. Check whether the offer incorporates the landlord’s standard lease, what it says about deposits, and which terms or conditions are still open. If you already signed something, tell your lawyer what was accepted and whether a deadline is approaching.
What will the space cost beyond base rent?
Base rent is the starting rent in the agreement. Additional rent can include a share of property taxes, building insurance and operating costs such as maintaining common areas. Utilities, parking and applicable HST can also affect your budget. The list of charges and how they are allocated depend on the lease.
Check which costs the landlord can pass through, how your share is calculated, and whether there are estimates followed by year-end adjustments. The lease may set out rights to see supporting records or limits on certain increases.
Example: Lower base rent, higher monthly cost
One unit has hypothetical monthly base rent of $3,000 and estimated additional rent of $1,100, for a total of $4,100. Another has base rent of $3,600 and estimated additional rent of $300, for a total of $3,900. Both figures exclude utilities and applicable HST. The additional rent terms matter as much as the advertised base rent when comparing these two offers.
Can you operate the business you have planned?
The lease’s permitted use clause can affect what you sell, how you operate and whether you can expand into related activities. For example, a space that works for selling packaged goods may need a different permitted use or different approvals if you plan to prepare food on site.
Permission in the lease does not replace zoning, building, licensing or other approvals that apply to your business. If opening depends on a particular approval, signage, ventilation, parking or loading access, raise that requirement while the terms are still open. Review whether any commitment or rent start date depends on those requirements being met.
Who pays for renovations, repairs and delays?
Check the condition in which the landlord will deliver the space, what work each party will do, and which approvals are needed for your renovations. Access to set up the space, the lease start date and the date rent becomes payable can be different. If landlord work is delayed, the wording determines what happens to the dates and charges.
Read repair and replacement obligations separately. Servicing the heating, ventilation and air conditioning system can be a different commitment from replacing it. Look at the roof, structure, plumbing and major equipment, and whether a cost can be charged through additional rent even when the landlord arranges the work. Also check what fixtures you can remove and what you must restore when you leave.
What do the deposit and personal guarantee cover?
Check what any deposit secures, when it can be applied and under what terms it will be returned. A deposit and a personal guarantee protect the landlord in different ways.
Even if a corporation is the named tenant, a personal guarantee can make the signer responsible for unpaid rent or other obligations it covers. Review which obligations it covers, whether it is limited in amount or time, and how a renewal or transfer could affect it. See our guide to personal guarantees for Ontario business owners.
What happens if you renew, sell or need to leave?
Renewal: Check whether there is a renewal option, when notice is due, what conditions apply and how the new rent is set. An option can give you a right to renew if its terms are met. It does not necessarily fix the rent in advance.
Assignment and subletting: An assignment transfers the tenant’s lease interest. A sublease gives another party rights to occupy space under the original tenant. The lease can require landlord consent and may also address a change in control of the tenant company.
If a lease requires consent to an assignment or sublease, Ontario’s Commercial Tenancies Act generally says consent cannot be withheld unreasonably unless the lease expressly provides otherwise. A landlord’s consent to a transfer does not necessarily release the original tenant or guarantor from their obligations.
Early exit: A change in business plans does not itself end a fixed term. Review any early termination or negotiated exit terms, as well as restoration, payments and guarantees. If the premises matter to a future sale, review the lease alongside the proposed structure of the transaction.
How can Legal Route help before you sign?
We can review an offer or draft lease, explain which terms affect your plans and identify points to raise in negotiations. A review may focus on one proposed document or include further negotiation work, depending on the agreed scope. We confirm who we can represent, check conflicts and agree on the work before an engagement begins.
Legal Route’s legal services are provided by lawyers licensed by the Law Society of Ontario.
What to have ready for an initial inquiry
- The parties and premises: The names of the tenant and landlord, the property location and the type of business you plan to operate.
- The documents: Whether you have a letter of intent, an offer, a draft lease or a separate guarantee, and whether anyone has signed.
- The timing: Any offer, possession or opening date and any work or approval your plans depend on.
Wait for secure delivery instructions before sending a lease, banking information or other confidential business records.
Commercial lease consultations in Brampton and across Ontario
In person in Brampton. Appointments are available by arrangement at our Brampton office, 2074 Steeles Avenue East, Unit 17.
Toronto and the GTA. We assist businesses in Toronto and across Peel, York, Halton and Durham, including Mississauga, Markham, Burlington and Pickering.
Virtual appointments across Ontario. Virtual appointments are available for suitable matters, including for business owners in Hamilton, Kitchener and Ottawa. We explain any document, signing or attendance requirements for your matter. See our Ontario service areas.
Frequently asked questions about Ontario commercial leases
Does a rent-free period cover all charges?
It depends on the offer or lease. A rent concession might apply only to base rent. Additional rent, utilities or other charges may still be payable during that period.
Can I negotiate a cap on operating cost increases?
You can ask for a cap, but the landlord must agree to it. Look at which expenses the cap covers, which are excluded and how the limit is calculated. A cap on one category of costs may leave other charges open.
Do I automatically get the lease if I buy the business?
No. In an asset purchase, taking over the lease may need an assignment or a new lease. In a share purchase, the tenant company may stay the same, but a change in control clause can still require consent. The lease and sale documents should be considered together.
Can the landlord move my business to another unit?
Review whether there is a relocation clause. If there is, check what notice is required, who pays for moving and setting up the new unit, and what happens if the replacement space does not suit your business.
Is HST included in the quoted rent?
Commercial rent is generally a taxable supply for GST/HST purposes. Whether the quoted amount includes applicable tax depends on the wording. Confirm what the quote covers before using it in your budget.
Discuss your commercial lease with Legal Route
Tell us what you have been asked to sign, how you plan to use the premises and when you need to decide. We can explain what a commercial lease review would cover.
Request a commercial lease consultation
Call 905-283-8514 or see Brampton office and appointment details. An inquiry does not create a lawyer-client relationship or confirm that we have accepted the matter.
Related Legal Route resources
Official resources
- Ontario: Renting commercial property
- Ontario’s Commercial Tenancies Act
- City of Brampton: Zoning information
- Canada Revenue Agency: GST/HST and commercial real property rentals
This article provides general Ontario legal information. Your rights and obligations depend on the documents, the premises and your circumstances.