Assigning Contracts and Leases in an Ontario Asset Purchase: Consent Traps to Watch For

In an asset purchase, buying the business does not automatically mean buying the right to step into its contracts. Leases, supplier agreements, customer contracts, and licences are themselves assets, and most of them need to be assigned to the buyer individually — which often means asking someone else's permission first.

Missing this step, or starting it too late, is one of the more common ways an otherwise well-negotiated asset purchase runs into trouble right before closing. This article walks through where consent is required, what the law says about commercial leases specifically, and how to build a process around it.

Why Contracts Don't Just "Come With" the Assets

This is one of the sharpest differences between an asset purchase and a share purchase. In a share purchase, the corporation's contracts stay in its name because the corporation itself has not changed — no assignment is needed. In an asset purchase, the buyer is a different legal entity, so each contract the seller has with a third party — a landlord, a key supplier, a major customer, an equipment lease — has to be specifically identified, and either assigned to the buyer or replaced with a new agreement.

Many of those contracts include their own restrictions on assignment, which means the seller and buyer cannot simply decide unilaterally that the contract is transferring.

Commercial Leases: The Consent Rule (and Its Limits)

Commercial leases are usually the highest-stakes example, since losing the location can undermine the whole purchase. Ontario's Commercial Tenancies Act provides some protection here: where a lease restricts assignment or subletting without the landlord's consent, section 23 of the Act generally implies that consent is not to be unreasonably withheld, unless the lease itself expressly says otherwise.

That last part matters. The statutory default only fills gaps — it does not override a lease that has its own, different wording on assignment. That means the actual lease document has to be reviewed early, not assumed to work a particular way just because "the law generally says consent can't be unreasonably withheld."

Contracts With Anti-Assignment or Change-of-Control Clauses

Leases are not the only contracts with assignment restrictions. Supplier agreements, financing arrangements, distribution agreements, and some customer contracts often include their own anti-assignment or change-of-control language. When a contract like this exists:

• The counterparty may have a right to refuse the assignment outright.
• The counterparty may use the moment as leverage to renegotiate pricing or other terms.
• Some contracts terminate automatically on a change of control or assignment unless the counterparty agrees otherwise.

None of this is uniform. It depends entirely on the specific wording of each contract, which is exactly why a contract-by-contract review is part of standard due diligence rather than something that can be assumed away.

A Due Diligence Checklist for Contract Assignment

• [ ] List every material contract and lease the buyer wants to acquire as part of the deal
• [ ] Review each one for assignment restrictions, consent requirements, or change-of-control clauses
• [ ] Identify which consents are needed and from whom
• [ ] Start consent requests as early as practical — some counterparties move slowly, and a refusal discovered late can jeopardize the whole timeline
• [ ] Track responses and build outstanding consents into the closing conditions

What Happens If a Consent Can't Be Obtained by Closing

Sometimes a needed consent simply is not available by the closing date. Parties handle this in different ways depending on how important that specific contract is to the deal — options can include closing without that contract and addressing it afterward, structuring an interim arrangement until consent is obtained, treating the missing consent as a condition that must be satisfied before closing can happen at all, or adjusting the purchase price to reflect the loss. Which approach makes sense depends heavily on how central that contract is to the business being purchased.

Trade Names: A Related but Separate Registration Step

If the buyer intends to keep operating under the seller's existing trade name, that is a related but distinct issue from contract assignment. A business operating under a name other than its own full legal or corporate name generally needs to register that name under the Business Names Act — the buyer does not inherit the seller's registration automatically just by buying the business assets, and needs its own registration in place.

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