- Most commercial leases include a covenant against assignment or subletting without the landlord's consent.
- Where the implied proviso does apply, reasonableness generally turns on legitimate concerns about the incoming tenant's ability to pay rent and meet its obligations under the lease — not…
- A landlord weighing whether to approve an incoming tenant will often want some combination of the following before signing off: - Financial evidence.
If the business you're buying operates out of leased commercial space, the lease is often one of the most important pieces of the whole deal — and one the seller can't simply hand over on its own. Almost every commercial lease requires the landlord's consent before it can be assigned to a new tenant, and Ontario law gives landlords real, though not unlimited, room to set conditions before agreeing.
This article looks specifically at what a landlord can require before consenting to assign a lease to a business buyer, so you know what to prepare for rather than being caught off guard partway through the deal.
Why Landlord Consent Is Almost Always Required
Most commercial leases include a covenant against assignment or subletting without the landlord's consent. Ontario's Commercial Tenancies Act addresses these covenants directly: where a lease contains one, the law deems it to include an implied proviso that consent is not to be unreasonably withheld — unless the lease itself expressly says otherwise. That last part matters enormously. The lease's own wording controls first, and plenty of commercial leases are drafted to give the landlord broad, even sole, discretion over consent.
What "Not Unreasonably Withheld" Generally Means
Where the implied proviso does apply, reasonableness generally turns on legitimate concerns about the incoming tenant's ability to pay rent and meet its obligations under the lease — not on reasons unrelated to the tenant's own suitability. That's a general principle, not a checklist, and how it plays out depends heavily on the specific lease and circumstances. It's not a substitute for reading the actual lease and getting advice on your specific situation.
What Landlords Commonly Ask For Before Consenting
A landlord weighing whether to approve an incoming tenant will often want some combination of the following before signing off:
- Financial evidence. Statements or other proof that the buyer (or the buyer's principals) can meet the rent and other lease obligations going forward.
- A personal guarantee. Particularly common where the buyer is a newer or thinly capitalized company, a landlord may ask for a guarantee from the buyer's principals personally.
- A security deposit review. The landlord may ask for a new or increased deposit as a condition of consenting to the assignment.
- Confirmation of permitted use. The landlord will typically want assurance that the buyer's intended use of the premises still matches what the lease actually allows.
- An estoppel certificate from the seller. A written confirmation that the lease is in good standing, with no outstanding defaults, rent arrears, or side agreements the landlord hasn't already accounted for.
- Coverage of the landlord's own costs. Many leases entitle the landlord to recover its reasonable administrative or legal costs for reviewing and documenting a consent — the amount isn't fixed by law and depends on the lease and the landlord's own practice.
- A lease amendment. Some landlords use an assignment request as an opportunity to negotiate a renewed term or revised rent as the price of consent, particularly if the lease is nearing its end.
Whether any particular condition is reasonable, or something you have to accept, depends entirely on the wording of the actual lease — this isn't something to assume either way without a lawyer reviewing it.
Getting Ready Before You Approach the Landlord
- [ ] Read the lease's assignment clause carefully before assuming any general rule applies
- [ ] Prepare the buyer's financial information in a form a landlord can actually evaluate
- [ ] Confirm the buyer's intended use of the premises matches the lease's permitted-use language
- [ ] Ask the seller for records showing the lease is currently in good standing
- [ ] Decide in advance what the buyer's principals are and aren't willing to personally guarantee
- [ ] Approach the landlord early — negotiating consent terms can take real time, and a business sale timeline shouldn't assume it will be quick
Frequently asked questions
Can a landlord simply refuse to assign the lease no matter what?
It depends entirely on the lease's own wording. If the lease gives the landlord sole or absolute discretion over consent, the implied "not unreasonably withheld" standard generally doesn't apply, and the landlord may have much broader latitude to refuse.
What if the lease is silent on assignment altogether?
This is uncommon in practice, since most commercial leases address assignment directly, but if it happens the answer depends on general contract principles and the specific lease as a whole — get a lawyer to review it rather than assuming a default rule.
Does the buyer or the seller usually deal with the landlord?
It varies by deal, but since the seller holds the existing tenant relationship, sellers are often the ones who make first contact — with the buyer actively supplying financial information and any personal guarantees the landlord requests.
What if the landlord wants to renegotiate the rent as a condition of consent?
This happens, particularly with older leases or below-market rent. Whether to accept new terms, push back, or walk away is a commercial decision for the buyer and seller — but it should be made deliberately, with legal advice, rather than under time pressure at the last minute.
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