- An assignment transfers the seller's existing lease to you, as-is, with the landlord's consent.
- With an assignment, you inherit the lease exactly as it stands — the same rent, the same remaining term, the same renewal options, and the same restrictive covenants or use clauses.
- Instead of an assignment, a buyer and the landlord can negotiate an entirely new lease.
If the business you're buying operates from leased premises, there are usually two different roads to keeping the location: taking over the seller's existing lease by assignment, or negotiating a brand-new lease directly with the landlord. They can lead to the same result — you, running the business, in the same space — but the legal path, the terms you end up with, and what happens to the seller afterward are all meaningfully different.
Two Different Paths Into the Same Premises
An assignment transfers the seller's existing lease to you, as-is, with the landlord's consent. A new lease starts fresh: a new negotiation, a new document, and a new relationship between you and the landlord that has nothing contractually to do with the seller's old lease once it's replaced.
Which one is available, or preferable, depends on how favourable the existing lease is, how much time is left on it, and whether the landlord is willing to negotiate.
Assignment: Stepping Into the Seller's Lease
With an assignment, you inherit the lease exactly as it stands — the same rent, the same remaining term, the same renewal options, and the same restrictive covenants or use clauses. This can be a real advantage if the seller locked in favourable rent years ago, or has valuable renewal rights baked in. It can also be a disadvantage if the lease has an inconvenient use clause, an unfavourable term length, or other conditions you'd rather not inherit.
Assignment requires the landlord's consent. Under Ontario's Commercial Tenancies Act, that consent generally can't be unreasonably withheld unless the lease's own wording says otherwise — but the landlord still gets a say, and the process takes time to coordinate around your closing date.
A Fresh Lease: Starting a New Landlord Relationship
Instead of an assignment, a buyer and the landlord can negotiate an entirely new lease. This gives both sides a clean slate — potentially a different term length, updated rent reflecting current market conditions, a different security deposit, or revised terms the buyer specifically wants. The tradeoff is that a new lease means giving up whatever favourable terms the seller's existing lease locked in; landlords generally have little incentive to simply hand over old below-market terms to a new tenant they're negotiating with fresh.
Side-by-Side Comparison
| Factor | Lease Assignment | New Lease |
|---|---|---|
| Rent and term | Inherited as-is from the existing lease | Negotiated fresh, typically at current terms |
| Landlord's involvement | Must consent to the assignment | Negotiates the new lease directly |
| Seller's ongoing liability | Often continues unless the landlord releases the seller | Generally resolved by ending the old lease and starting anew |
| Ability to change terms | Limited, unless the landlord agrees to amend | Open to negotiation from the start |
| Typical use case | Existing lease has favourable rent, term, or renewal rights worth preserving | Existing lease is near expiry, unfavourable, or the landlord prefers a fresh start |
Which Makes More Sense for a Given Deal?
- How favourable is the existing rent and term relative to what's available today? If the seller's lease is well below current market terms, assignment is usually worth pursuing.
- How much term is left? A lease with only a short time remaining may not be worth assigning if you'll need to renegotiate with the landlord again soon anyway.
- Do you want to change how the space is used or configured? A new lease gives more room to negotiate use clauses and any needed alterations from the outset.
- Is the landlord willing to work with an assignment, or clearly pushing for a new lease? Some landlords prefer the opportunity a tenant change gives them to reset rent to current market rates.
- How much time do you have before closing? Both paths take coordination, but a brand-new lease negotiation can sometimes take longer to finalize than obtaining consent to an existing arrangement.
Frequently asked questions
Can a buyer negotiate a new lease even if assignment is available?
Yes — a buyer isn't obligated to take an assignment just because the landlord would consent to one. If a new lease on different terms serves the buyer better, that can be raised directly with the landlord, though the landlord ultimately has to agree to give up the assignment path and negotiate fresh.
Does the seller need to be released if the buyer just gets a new lease instead?
Generally, yes — if the old lease is being terminated or surrendered in favour of a brand-new lease with the buyer, the seller's obligations under the old lease should be expressly resolved as part of that process, rather than left ambiguous.
What happens to the seller's security deposit under either option?
This is typically addressed directly between the parties and the landlord as part of the transaction — sometimes the deposit is returned to the seller and a fresh deposit collected from the buyer, and sometimes it's credited or transferred. There's no single default outcome; it depends on the specific arrangement negotiated.
Is one option faster to close than the other?
Not necessarily — both require the landlord's active participation, and either can become the bottleneck depending on how responsive the landlord is and how much needs to be negotiated. Build realistic time into your purchase agreement for whichever path you're pursuing.
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