- Assignment consent is about the lease itself.
- Under Ontario's Commercial Tenancies Act, where a lease contains a covenant against assignment or subletting without the landlord's consent, the law reads in an implied proviso: that…
- Assignment consent tells the lender the lease will keep going after closing.
If the business you're buying operates out of leased premises, your lender will usually want more than just a copy of the lease. Two separate landlord-related approvals often come up in the same deal — consent to assign the lease itself, and a separate agreement (sometimes called a landlord waiver) protecting the lender's security over equipment and other assets located on the premises. Confusing the two, or leaving either until the last week before closing, is a common way business purchases get delayed.
This article explains both, and how the Commercial Tenancies Act shapes what a landlord can and can't do when asked for consent.
Two Different Approvals, Often Confused
Assignment consent is about the lease itself. If the business's lease is being assigned from the seller to the buyer (or from the seller's corporation to a new corporation), the landlord generally has to consent to that assignment — this is a standard lease term, and without it the buyer has no enforceable right to occupy the premises going forward.
A landlord waiver (or consent and non-disturbance agreement) is a separate document your lender wants, addressing something different: many commercial leases give a landlord rights against a tenant's property left on the premises if rent goes unpaid. A lender taking security over the buyer's equipment or leasehold improvements wants the landlord to formally agree that the lender's rights come ahead of — or at least aren't defeated by — the landlord's own claims against that same property.
Both are landlord documents. Neither one automatically covers what the other is for.
What the Commercial Tenancies Act Says About Withholding Consent
Under Ontario's Commercial Tenancies Act, where a lease contains a covenant against assignment or subletting without the landlord's consent, the law reads in an implied proviso: that consent is not to be unreasonably withheld — unless the lease itself expressly says otherwise. In practice, this means:
- If the lease is silent on the standard, the landlord generally can't refuse consent to an assignment arbitrarily or for no legitimate business reason.
- If the lease expressly says the landlord can withhold consent in its sole discretion or similar wording, that override can control instead — so the actual wording of your specific lease matters more than the general rule.
- "Unreasonable" is assessed on the landlord's actual reasons at the time, not on what might seem fair in hindsight — a landlord asking for reasonable financial information about the incoming tenant, for example, is unlikely to be acting unreasonably.
Why a Lender Wants Its Own Landlord Agreement, Not Just the Assignment Consent
Assignment consent tells the lender the lease will keep going after closing. It doesn't, by itself, protect the lender's security interest in what's sitting on the premises. A separate landlord waiver typically addresses:
- The landlord's acknowledgment that the lender may enter the premises to remove or deal with its collateral if the borrower defaults.
- Confirmation the landlord won't treat the lender's equipment as available to satisfy unpaid rent ahead of the lender's own claim.
- Notice rights — the landlord agreeing to tell the lender if the tenant defaults on rent, giving the lender a chance to step in before the lease is terminated outright.
Getting Both in Place Without Delaying Closing
- Identify the requirement early. Read the lease's assignment clause and flag it to your lawyer and lender at the start of due diligence, not the week before closing.
- Approach the landlord with both requests together. Landlords often deal with assignment consent and a lender's waiver as one combined ask rather than two separate negotiations.
- Expect the landlord's own conditions. A landlord may use this as an opportunity to update rent, extend a term, or require a personal guarantee from the new tenant — none of this is required by the Act, but it's common in practice.
- Build in lead time. Landlord responses are rarely instant, and a landlord who is slow, cautious, or has its own lawyer review the waiver can affect your closing timeline — leave room for that in your agreement of purchase and sale.
Frequently asked questions
What if the lease doesn't allow assignment at all?
Some leases prohibit assignment outright, or reserve total discretion to the landlord. In that case the implied "not unreasonably withheld" standard may not apply, and the landlord's cooperation becomes a negotiated, not guaranteed, part of the deal — this needs to be identified during due diligence, before you're committed to buying.
Can the landlord charge a fee for giving consent?
Leases sometimes include an administrative fee or require the tenant to cover the landlord's reasonable legal costs of reviewing the assignment. Whether — and how much — depends entirely on your specific lease wording.
Does the lender's waiver replace the landlord's consent to assign the lease?
No. They serve different purposes. You typically need the assignment consent for the lease to transfer at all, and a separate landlord waiver for the lender's security to be effective against property on the premises.
What happens if the landlord simply won't cooperate?
This is one of the more common closing risks in a leased-premises business purchase. Depending on the lease wording, you may have grounds to argue the landlord is acting unreasonably, but that can mean delay or dispute rather than a quick fix — it's worth assessing the landlord relationship and lease terms before you're locked into a purchase agreement.
This is a business purchase or sale question
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