What should I check before I sign a commercial lease?

Commercial leases in Ontario are not covered by the Residential Tenancies Act — there's no rent control, no standard lease form, and few default protections beyond what the Commercial Tenancies Act and the lease itself provide. Most of what governs the relationship is whatever the parties actually negotiated and signed, which makes reading the document, clause by clause, essential before a term measured in years.

Rent is usually structured one of three ways: gross rent (one number covers rent and the landlord's operating costs), net rent (base rent plus your share of property tax, insurance and common-area maintenance — often called "additional rent" or TMI — billed separately), or percentage rent (a base rent plus a cut of sales, common in retail and mall leases). Know which one you're signing: a low "base rent" on a net lease can add up to more than a higher gross rent once additional rent is included — ask for last year's actual TMI figures before you sign.

The term and any renewal option set how long you're committed and what it costs to extend — a renewal at "market rent" with no formula attached can be a real fight later. The permitted-use clause defines what you're allowed to operate; changing your business model later can put you offside it. Watch for an exclusivity clause (protects you from a competing tenant in the same plaza) and a co-tenancy clause (rent relief if an anchor tenant leaves) if either matters to your business.

Assignment and subletting matter most if you ever sell the business or move: under section 23 of the Commercial Tenancies Act, a lease clause requiring the landlord's consent to assign is read as requiring that consent not be unreasonably withheld — unless the lease expressly says otherwise, which many landlord-drafted leases do. Where the statutory protection applies and a landlord refuses unreasonably, a tenant can apply to the Superior Court of Justice for an order treating the refusal as consent.

A net lease typically pushes property tax, insurance and common-area maintenance onto the tenant as additional rent — ask for a cap or a right to audit these charges, since they're calculated by the landlord and can rise every year. Repair and maintenance obligations are usually split by area: the tenant maintains the interior of their own unit, the landlord maintains the structure, roof and common areas — but the exact line is set entirely by the lease's wording, not by any default rule.

Leasehold improvements — the buildout you pay for — usually become the landlord's property at the end of the lease unless the lease says you can remove them. If you're buying a business, check what state the space has to be returned in; a restoration clause can be a real cost buried at the back of the document.

Many commercial landlords will ask the principal of a small or new company to personally guarantee the lease — meaning if the company defaults, the landlord can pursue the individual directly for the rent owed, sometimes for the whole remaining term. A personal guarantee is negotiable: a cap on the amount, a time limit (say, the first two years), or a release once the business hits certain revenue or the lease is assigned to a buyer are all things to ask for before signing. If you're buying a business that already carries the seller's personal guarantee, don't assume it simply disappears — ask whether the landlord has released the outgoing owner in writing.

A landlord can also enforce unpaid rent through distress — seizing goods on the premises to sell toward the rent owed — without going to court first, a remedy Ontario commercial landlords have that residential landlords do not.

A letter of intent sets out the business terms before the lawyers draft the lease — useful for narrowing negotiation, but check whether it says it's non-binding, because courts will hold parties to an LOI's terms if the wording supports that. Once you're past the LOI, the lease itself is where the real protection is built: the assignment clause, the personal guarantee, the renewal formula and the repair split are all far easier to negotiate before signature than after the space is already fitted out and the business is open.