- Before approaching the landlord, read the assignment clause carefully.
- Landlords generally aren't trying to block a sale outright — they're trying to protect their own interest in a tenant who can pay rent and run the business properly.
- Review the lease's assignment clause and notice requirements — some leases specify exactly what must be delivered to the landlord and how.
If your business operates out of leased premises, your lease is one of the most important assets in the sale — and one of the easiest things to underestimate. Unlike most of the other pieces of a business sale, landlord consent to assign the lease isn't entirely in the buyer's or seller's control. A third party who wasn't at the negotiating table gets a say, and getting that consent lined up late is a common reason closings slip.
Here's what a seller typically needs to do, and gather, before an assignment of a commercial lease can close alongside the sale.
Start With the Lease Itself
Before approaching the landlord, read the assignment clause carefully. Most commercial leases:
- Prohibit assignment or subletting without the landlord's written consent
- Set out what information the tenant must give the landlord about the proposed assignee
- May include a change-of-control clause that applies separately if the sale is structured as a share sale rather than an assignment of the lease itself
Under Ontario's Commercial Tenancies Act, where a lease restricts assignment without consent, the Act generally implies that such consent is not to be unreasonably withheld — but the lease's own wording controls first. If your lease gives the landlord broader discretion than that, the statutory backstop may not help you.
What Landlords Typically Want to See
Landlords generally aren't trying to block a sale outright — they're trying to protect their own interest in a tenant who can pay rent and run the business properly. Expect requests for some combination of:
- Financial information about the proposed buyer (personal or corporate financial statements)
- Details of the buyer's business plan or intended use of the premises
- A personal guarantee from the buyer (or the buyer's principals)
- Confirmation of adequate insurance
- An updated security deposit, in some cases
Requesting Consent: A Practical Timeline
- Review the lease's assignment clause and notice requirements — some leases specify exactly what must be delivered to the landlord and how.
- Notify the landlord in writing early, well before the anticipated closing date, and provide the requested information about the buyer.
- The landlord reviews the request and may come back with conditions before agreeing.
- Negotiate any conditions — additional security, a guarantee, or other terms the landlord wants attached to its consent.
- Execute a formal Assignment and Assumption of Lease once consent is obtained, so the buyer is properly substituted as tenant.
- Confirm this step is complete before the purchase agreement's closing conditions are satisfied.
The Assignment and Assumption of Lease Document
Landlord consent alone isn't the finish line — the assignment itself is usually documented in a formal Assignment and Assumption of Lease, signed by the landlord, the seller (as assignor), and the buyer (as assignee). This document confirms the buyer takes on the lease's ongoing obligations going forward and clarifies the parties' respective positions from the effective date.
Does the Seller Stay on the Hook After Assignment?
This is one of the most commonly misunderstood points in a lease assignment: assigning a lease to the buyer doesn't automatically release the seller from it. Many commercial leases expressly provide that the original tenant remains liable for the lease's obligations for the balance of the term, even after a properly consented assignment, unless the landlord agrees to a full release. Whether a release is available — and whether it's worth negotiating for — should be raised with the landlord as part of the same consent request, not treated as an afterthought.
A Seller's Pre-Closing Checklist
- [ ] Gather the lease and every amendment, renewal, or side letter affecting it
- [ ] Confirm there are no outstanding defaults or rent arrears that could complicate the request
- [ ] Provide the landlord with the buyer's information as early as the lease and the deal timeline allow
- [ ] Get the landlord's consent in writing — never rely on a verbal "that should be fine"
- [ ] Clarify whether the seller is being fully released or remains secondarily liable
- [ ] Align the lease assignment condition and its deadline with the purchase agreement's own closing timeline
Frequently asked questions
What if the lease doesn't have an assignment clause at all?
This is unusual for a commercial lease but not impossible, especially with older or informally drafted leases. Without an assignment clause, the general legal position and the parties' other obligations under the lease need to be reviewed carefully — this is a case where you should get the lease looked at by a lawyer before assuming either that consent is required or that it isn't.
How early should the seller approach the landlord?
As early as the deal timeline allows. Landlord consent is a step that depends on someone outside the transaction, so it's a common bottleneck if left until shortly before the planned closing date.
Can the landlord charge a fee for reviewing the assignment request?
Some leases allow the landlord to recover reasonable costs (such as legal fees) associated with reviewing and processing a consent request — check your specific lease's wording rather than assuming either that a fee applies or that it doesn't.
What if the buyer would rather negotiate a new lease with the landlord than take an assignment?
That's a different path with different considerations — a fresh lease means renegotiated terms rather than stepping into the seller's existing rent and term, and it changes whether the seller remains liable going forward. It's worth discussing both options with your lawyer before deciding which one to pursue.
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