Can a commercial lease be assigned when I sell my Ontario business?

Most commercial leases in Ontario contain provisions governing assignment — the transfer of the tenant's interest in the lease to a new tenant. Assignment is typically permitted only with the landlord's consent, which most leases say cannot be unreasonably withheld. However, the landlord generally has the right to review the proposed assignee's financial covenant (their creditworthiness and business plan) before deciding whether to consent.

In a business sale, the transfer of the lease to the buyer is often one of the most critical steps. If the buyer cannot get landlord consent to the lease assignment, they may be unable to operate the business at its current location, which can be a deal-breaker.

Even when the landlord consents, the original tenant (the seller) may remain liable under the lease as a guarantor for the buyer's obligations unless the landlord provides a formal release. Sellers should always negotiate for a clean release from their lease obligations as a condition of the assignment.

Timing matters: getting landlord consent early in the transaction process avoids delays at closing. Budget for the possibility that the landlord will require lease renegotiation, additional security, or a consent fee as conditions of approval.