On most small business sales the lease is the deal. If the landlord will not consent to the assignment, or will only consent on new terms, the buyer is buying a business with nowhere to operate. That has to be a condition of closing.
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Read the assignment clause before anything else. The <a href="https://www.ontario.ca/laws/statute/90l07">Commercial Tenancies Act</a> provides that where a lease contains a covenant against assigning without consent, that covenant is deemed subject to a proviso that consent is not to be unreasonably withheld — unless the lease contains an express provision to the contrary. Plenty of commercial leases contain exactly that provision and hand the landlord absolute discretion.
Where the statutory proviso does apply and the landlord refuses or simply does nothing, a judge of the Superior Court of Justice can determine whether consent was unreasonably withheld and, if it was, permit the assignment. That order has the same effect as the landlord's consent. It is a real remedy, but it takes time that a closing date usually does not allow.
Even a cooperative landlord has rights the lease gave it. Many leases let the landlord terminate instead of consenting and take the premises back, charge its legal and administrative costs, demand the buyer's financial statements and personal covenants, reset rent to market on an assignment, or take a share of any premium the seller is charging for the lease.
So the sequence is: obtain the lease and every amendment early, read the assignment, change-of-control, use and termination clauses, and approach the landlord with the buyer's information package before the purchase agreement is signed. Landlord consent routinely takes several weeks, and it is rarely the buyer's fault when it does.
An assignment transfers the tenant's interest in the lease. It does not, by itself, end the original tenant's liability. Unless the landlord signs a release, the seller remains liable on the lease covenants for the rest of the term — and so does anyone who signed an indemnity agreement or a personal guarantee, which in small business leases is often the seller's spouse.
Sellers should ask for a release and should expect to be refused. Where no release is available, the fallback is an indemnity from the buyer and its principals in the seller's favour, plus an obligation on the buyer to give the seller notice of any default and not to extend the term without consent. It is imperfect, and it is one reason some sellers prefer a share sale.
Buyers face the mirror image. The landlord will want the buyer's principals to sign a personal indemnity covering the balance of the term. That is a personal liability that survives the business failing, and it should be negotiated rather than accepted. Landlords agree to a capped amount or a limited number of years more often than people bother to ask.
Get a landlord's estoppel certificate as a closing condition. It confirms the current rent, the term, the deposit the landlord holds, whether there are arrears, whether the landlord alleges any default, and what options remain. It converts the seller's account of the lease into the landlord's, which is the version that will matter later.
Remaining term is the first thing to price. A business with eighteen months left and no renewal is worth materially less than the same business with seven years of term, because everything the buyer invests in the location can be taken away. Check which renewal options have already been exercised and how many, if any, remain.
Renewal options are frequently drafted as personal to the named tenant, or are lost on an assignment or a change of control. Where the value in the deal depends on a renewal, the option has to be confirmed as assignable and confirmed as surviving — in writing from the landlord, in the consent document itself, not in the listing agent's summary.
Then the clauses that quietly reduce value: demolition and relocation rights, exclusive-use protections that expire or that the landlord has already breached, radius restrictions, a permitted use that does not cover what the buyer intends, percentage rent, operating-cost reconciliations arriving after closing, and restoration obligations at the end of the term.
A share purchase does not avoid any of this. The tenant entity is unchanged, so there is no assignment — but nearly every commercial lease treats a transfer of control of the tenant as if it were an assignment and requires the same consent. It is also the moment landlords ask new owners for indemnities they never previously had. Our fee for a straightforward purchase or sale starts at $3,388.87, taxes included — <a href="/pricing">see pricing</a>.
It depends on the lease. Where the lease bars assignment without consent and says nothing further, the Commercial Tenancies Act deems that consent is not to be unreasonably withheld. But that proviso applies only unless the lease contains an express provision to the contrary, and many commercial leases give the landlord an absolute discretion to refuse.
Where the statutory proviso applies, a judge of the Superior Court of Justice can determine whether consent was unreasonably withheld and permit the assignment, and that order has the same effect as the landlord's consent. It is a genuine remedy but a slow one. Start the consent request weeks before your closing date instead.
Usually yes. An assignment transfers the tenant's interest but does not end the original tenant's liability, and any indemnity agreement or personal guarantee continues as well. Ask the landlord for a release and expect resistance. Where none is available, take an indemnity from the buyer and its principals and require notice of any default.
Usually. There is no assignment, because the tenant entity does not change, but most commercial leases treat a transfer of control of the tenant as if it were an assignment and require consent on the same terms. It is also the point at which landlords ask the incoming owners for personal indemnities they did not previously hold.
A signed statement from the landlord confirming the basic facts of the lease: current rent, term and expiry, the deposit held, whether rent is in arrears, whether the landlord alleges any default, and what renewal or other options remain. It replaces the seller's version of the lease with the landlord's, and should be a closing condition.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.