The Commercial Tenancies Act and Business Sales in Ontario: What Applies

Ontario's Commercial Tenancies Act comes up constantly in business sales, but it's frequently misunderstood — either overestimated as a guarantee that consent to assign a lease can't reasonably be refused, or underestimated as irrelevant because "the lease will just say what it says." Both instincts miss the real picture. Here's what the Act actually does, where it fits, and where it stops.

What the Commercial Tenancies Act Is

The Commercial Tenancies Act, R.S.O. 1990, c. L.7 is Ontario's general statute governing the landlord-tenant relationship for commercial (non-residential) leases. It's separate from the Residential Tenancies Act, which governs residential tenancies and has no application to business premises. If your business operates from leased commercial space, the Commercial Tenancies Act — together with the specific wording of your lease — is the framework that applies.

The Default Rule on Assignment Consent

Section 23(1) of the Act sets out one of its most practically important rules: where a lease contains a covenant or condition against assigning or subletting without the landlord's consent, the Act implies a proviso into that covenant that consent is not to be unreasonably withheld — unless the lease itself expressly provides otherwise. This proviso applies to leases made after September 1, 1911, which in practice covers essentially every commercial lease currently in force in Ontario.

In plain terms: if your lease requires landlord consent to assign, and the lease is silent on the standard for that consent, the Act fills the gap with a reasonableness standard.

What the Act Does Not Do

It's just as important to be clear about the limits:

• It doesn't remove the need for consent in the first place. If your lease requires landlord consent to assign, that requirement still applies — the Act only shapes the standard the landlord must apply, not whether consent is needed at all.
• It doesn't define "reasonable." Whether a particular refusal is reasonable is assessed on the specific facts of each situation — the Act doesn't supply a checklist.
• It doesn't override express lease wording. If the lease itself says the landlord can withhold consent in its sole or absolute discretion, that language generally displaces the statutory default.
• It doesn't set a response deadline. The Act doesn't require a landlord to respond within a specific number of days; unless the lease itself sets a timeline, the general expectation is a response within a reasonable time.
• It isn't a substitute for reading your actual lease. The Act is a backstop that fills gaps — it doesn't replace the need to review your specific assignment clause and any related provisions.

How This Plays Out in a Business Sale

Whether the Commercial Tenancies Act's assignment-consent rule is even engaged depends on how the business sale is structured:

• In an asset sale, the lease itself is typically being assigned from the seller to the buyer. This directly triggers the lease's assignment clause and, in turn, the Act's implied reasonableness proviso (subject to the lease's own wording).
• In a share sale, the corporate tenant under the lease doesn't change — the same legal entity remains the tenant, just under new ownership. The lease's assignment clause generally isn't triggered by a share sale on its own. However, many commercial leases include a separate change-of-control clause requiring landlord notice or consent specifically when the corporate tenant's ownership changes hands — this is a distinct provision from the standard assignment clause and needs to be checked independently.

Commercial Tenancies Act vs. the Lease Itself

The recurring theme across all of this: the Act supplies a default, and the lease's own express terms come first. Before relying on the Act's reasonableness standard, or assuming a share sale sidesteps landlord involvement entirely, read the specific lease. Every commercial lease is drafted differently, and the interaction between the Act's default rules and your particular lease's wording is exactly the kind of thing worth having reviewed before a sale closes, not after a dispute arises.

Frequently asked questions