- Asset Purchase: The Lease Has to Be Assigned In an asset purchase, the buyer acquires specific assets of the business, and the lease is one of them.
- Where a commercial lease restricts assignment or subletting without the landlord's consent, Ontario's Commercial Tenancies Act deems that restriction to include an implied condition: the…
- - [ ] Read the lease's assignment clause in full, not just whether one exists - [ ] Check for a change-of-control or "deemed assignment" clause that could apply to a share purchase - [ ]…
If the business you're buying operates out of a leased space — a storefront, a restaurant, an office suite, a warehouse unit — the lease is often as important to the deal as the equipment or the customer list. Yet what happens to the lease when a business changes hands depends heavily on whether you're structuring the deal as an asset purchase or a share purchase, and on exactly what the lease itself says.
Landlords have their own interest in who occupies their space, which is why lease treatment is one of the first things a buyer's lawyer checks once a deal is on the table. Get it wrong, and you can end up with a signed purchase agreement for a business that has nowhere to operate on closing day.
This article walks through how a lease moves — or doesn't — under each deal structure, what Ontario law says about a landlord withholding consent, and what to confirm before you rely on the existing lease carrying on.
Two Deal Structures, Two Different Starting Points
Asset Purchase: The Lease Has to Be Assigned
In an asset purchase, the buyer acquires specific assets of the business, and the lease is one of them. Because the lease is a contract between the seller and the landlord, moving it to the buyer generally means a formal assignment — with the landlord's consent — rather than something that happens automatically at closing. Until that assignment is signed and the landlord agrees, the buyer typically has no legal right to occupy the space under that lease.
Share Purchase: The Tenant Usually Doesn't Change
In a share purchase, the buyer acquires the shares of the corporation that holds the lease — the tenant entity itself doesn't change. On paper, that often means no assignment is needed at all, since the same corporate tenant continues to hold the lease before and after closing.
In practice, many commercial leases include a change-of-control clause that treats a sale of the tenant corporation's shares (or a controlling interest in them) as if it were an assignment, triggering the same landlord-consent requirement. Never assume a share deal sidesteps the landlord — read the lease's assignment and change-of-control language before you rely on that assumption.
What Ontario Law Says About Landlord Consent
Where a commercial lease restricts assignment or subletting without the landlord's consent, Ontario's Commercial Tenancies Act deems that restriction to include an implied condition: the landlord's consent is not to be unreasonably withheld — unless the lease expressly says otherwise. This rule has applied to Ontario commercial leases for well over a century, but it is a default, not an override. If the lease itself gives the landlord an absolute or sole-discretion right to refuse, that wording generally controls instead.
This matters for negotiating strategy: a landlord who has a legitimate, reasonable basis for concern (the buyer's financial strength, a proposed change of use, an incompatible tenant mix) can often still say no. A landlord who is simply using consent as leverage to renegotiate rent or extract a fee has a weaker position — but "unreasonable" is judged on the facts, and disputes over it do happen.
A Practical Checklist Before You Rely on the Lease
- [ ] Read the lease's assignment clause in full, not just whether one exists
- [ ] Check for a change-of-control or "deemed assignment" clause that could apply to a share purchase
- [ ] Confirm the remaining term and whether any renewal options survive a change of tenant
- [ ] Check whether the landlord has a recapture right (the ability to take the space back instead of consenting)
- [ ] Ask whether the seller has given a personal guarantee, and whether the landlord will release it on closing
- [ ] Get the landlord's written consent (or an estoppel certificate confirming the lease is in good standing) before closing, not after
- [ ] Build landlord consent into the purchase agreement as a closing condition, with a clear outcome if consent is refused or delayed
Lease Treatment at a Glance
| Question | Asset Purchase | Share Purchase |
|---|---|---|
| Who is the tenant after closing? | The buyer, once the assignment is signed | The same corporation — usually unchanged |
| Is landlord consent typically required? | Yes, as an assignment | Only if the lease has a change-of-control clause |
| Does a seller's personal guarantee end automatically? | No — needs the landlord's release | No — needs the landlord's release |
| Is the lease term guaranteed to continue on the same rules? | Depends on the lease's assignment terms | Generally yes, since the tenant is unchanged |
Frequently asked questions
Can a landlord simply refuse to let us assign the lease?
It depends on the lease's own wording. If the lease is silent or says consent won't be unreasonably withheld, the landlord generally needs a legitimate reason to refuse. If the lease gives the landlord sole or absolute discretion, that stricter standard usually applies instead.
Does buying shares instead of assets always avoid dealing with the landlord?
No. Many commercial leases specifically address a change of control of the tenant corporation and treat it like an assignment. Always check the lease itself rather than assuming a share structure avoids landlord involvement.
What if the lease is close to expiring after we buy the business?
This is a negotiation point to raise before you sign anything, not after. Ask the seller to pursue a renewal or extension with the landlord as part of the deal, or price the risk of a shorter remaining term into your offer.
Who is responsible for leasehold improvements after the sale?
This is generally addressed in the purchase agreement rather than by the lease alone — it depends on whether the improvements are treated as part of the assets being purchased and how the lease characterizes them. Confirm this explicitly rather than assuming.
This is a business purchase or sale question
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