Renting A Commercial Property In Ontario

Renting commercial space is a major step for any business in Ontario. A commercial lease (or commercial rental agreement) is a contract between a business (tenant) and a property owner (landlord) that gives the tenant the right to use the premises for business purposes. Commercial leases in Ontario are governed by the Commercial Tenancies Act (CTA) rather than the Residential Tenancies Act. The CTA sets out basic rules, but the actual lease agreement which is freely negotiated usually controls the details. Because of this, commercial tenants have far fewer automatic protections than residential tenants. For example, landlords may freely raise rent at the end of a term, and they do not have to renew a lease.

This guide explains what business tenants should know: from choosing a location and understanding lease terms to knowing your limited rights and resolving disputes. We also suggest how to pick the right lawyer to protect your business interests.

Key Factors to Consider Before Renting

Before signing a commercial lease, a business should do its homework. Important factors include:

Location and Visibility: Ensure the neighbourhood and foot traffic suit your business. Check zoning bylaws to confirm your intended use is allowed. Consider access, parking, nearby businesses, and security of the area.
Lease Term and Renewal Options: Think about how long you need the space. Leases can be short-term (month-to-month) or long-term (5–10 years or more). Check if the lease has options to renew or extend. Do not assume a right to renewal; landlords are not required to renew, and often increase rent to encourage move-out.
Rent and Additional Costs: Commercial rent is usually higher than comparable residential rent. Understand exactly what is included. In a gross lease, you pay a flat fee and the landlord covers property taxes, insurance, and maintenance. In a net lease, you pay the base rent plus some or all operating costs (taxes, insurance, utilities, maintenance). (A triple-net lease is common for offices; the tenant pays rent plus all building expenses.) Retail leases may be percentage leases, where you pay base rent plus a share of sales. Always ask about Common Area Maintenance (CAM) fees and confirm how increases are calculated. (Unlike residential leases, commercial leases have no rent control, landlords can raise rent at will after the lease term.)
Tenant Improvements (TIs): Commercial spaces are often bare shells. Ask if the landlord offers a tenant improvement allowance (TIA) to customize the space. A TIA is a sum per square foot to cover renovations (e.g. adding walls, wiring, plumbing). If offered, clarify what's covered and the process (e.g. landlord reimbursement after completion). If no allowance is given, you may need to invest up-front.
Condition of Premises: Inspect the property (and building systems like HVAC, elevators, plumbing, roof). Commercial leases often say the premises are "as-is" unless stated otherwise. Note any existing damage or code violations and confirm who is responsible for repairs. It may be worth having a professional assessment, especially if your business needs special features (ventilation for a restaurant, signage, etc.).
Deposit and Guarantees: Landlords usually require a security deposit (often 1–3 months' rent) or a letter of credit. Technically, Ontario law does not mandate deposits for commercial leases, so you can negotiate this amount. If you pay a large deposit, remember it earns no interest for you. Ensure the lease clearly states how and when the deposit is returned (e.g. at lease end if all obligations are met).
Flexibility and Exit Options: Decide what happens if your business needs change. Some leases include a termination clause (for example, a break option after X years). Otherwise, you may need landlord consent to sublet or assign the lease. If you need to break the lease early and there's no clause, the landlord could hold you liable for remaining rent.
Legal Review: Finally, before signing, have a qualified commercial real estate lawyer review the lease.

By paying attention to these key factors- location, costs, lease terms, and legal advice – a business can avoid costly surprises and find the right commercial space.

Understanding Commercial Lease Agreements

A commercial lease agreement is the foundational contract that spells out the relationship between the landlord and the business tenant. Unlike residential leases, there is no standard form; each commercial lease is tailored to the tenant's needs. Typically, a commercial lease will include the following provisions:

Parties and Property: Names of the landlord (lessor) and tenant (lessee), and a description/address of the premises.
Term: The length of the lease (e.g. 5 years) or whether it's month-to-month.
Use Clause: What type of business is allowed (e.g. retail, office). This must comply with municipal zoning. Sometimes exclusive use provisions are included (e.g. "no other tenants may sell hardware").
Rent and Payment: Base rent amount, due dates, and payment method. Also, any provisions for rent increases (e.g. annual percentage hikes, Consumer Price Index adjustments, or step rent schedule).
Additional Rent/TMI: If it's a net lease, the tenant's share of taxes, maintenance, insurance (often called TMI: Taxes, Maintenance, Insurance). The lease should specify how these costs are calculated and paid.
Deposit/Security: Amount of security deposit or letter of credit, conditions for its return.
Insurance: Who must insure what (landlord often insures building, tenant insures contents and liability).
Repairs and Maintenance: Who is responsible for interior repairs (often the tenant) and exterior/structure repairs (often the landlord, unless it's a triple net lease).
Alterations and Improvements: Rules for any renovations or fixtures the tenant installs. Usually a landlord's approval is needed for major changes.
Subletting and Assignment: Whether (or with what consent) the tenant can sublease or assign the lease to another business.
Renewal/Extension Options: Any options for the tenant to renew or extend the lease and how rent will be determined.
Default and Remedies: What constitutes a breach (e.g. non-payment of rent, illegal use) and what remedies the landlord has (eviction, seizing assets, claiming damages).
Termination: Conditions under which either party can terminate early (some leases have "break" clauses for tenant or landlord).

These details, especially rent, term, permitted use, and maintenance obligations – are crucial and highly negotiated. A commercial lease "acts as a binding contract" and outlines the rights and responsibilities of both parties. In effect, the signed lease often overrides default rules in the Commercial Tenancies Act. For example, the Act does not limit rent increases, but a lease can agree on caps or notice periods.

Because each lease is unique, it's important that all agreed terms are written in the lease. A well-drafted commercial lease provides clarity on payments, who fixes what, and how the tenancy will end. A common checklist includes: rent amount, rent increase formula, insurance, maintenance duties, renewal options, permitted uses, and any special terms. Reading each clause carefully (or having a lawyer do so) is essential because once signed, the lease controls your rights.

Types of Commercial Leases

Commercial leases come in several formats, mainly distinguished by how costs are shared. The most common types in Ontario are:

1. Gross Lease: The tenant pays a fixed "gross" rent and the landlord covers most expenses (taxes, insurance, maintenance). In other words, you pay one set fee and the landlord pays for building operating costs. This simplifies budgeting, but gross rents tend to be higher on paper. Gross leases are often short-term and typical in multi-tenant office buildings or small retail.

2. Net Lease: The tenant pays base rent plus a portion of operating costs. There are variations:

Single Net: Tenant pays base rent and property taxes.
Double Net: Tenant pays base rent, property taxes, and building insurance.
Triple Net (NNN): Tenant pays base rent plus all property expenses (taxes, insurance, maintenance, utilities, etc.). In Ontario, triple net leases are very common for office buildings. Under NNN, the tenant effectively bears nearly all costs of occupancy, so base rent may be lower, but it can vary with actual expenses.

3. Modified Gross Lease: A hybrid where some costs are included in rent and some are passed through. For example, the landlord might cover janitorial and insurance, while the tenant pays utilities and property tax. Terms vary by deal.

4. Percentage Lease: Often used for retail (especially in malls), the tenant pays a base rent plus a percentage of gross sales once a minimum sales level is reached. This aligns rent with business performance. For example, a cafe might pay a 3% royalty on all revenue above $500,000.

Regardless of type, every lease will specify whether rent includes things like common area maintenance. Besides base rent there may be "additional rent/TMI" (taxes, maintenance, insurance) charged to the tenant. Percentage rent is explicitly noted if applicable.

Pros and Cons: Gross leases are easy on budgeting (one number) but less flexibility to control costs. Net (NNN) leases can offer lower starting rent, but you have to pay for variable expenses. Percentage leases may suit high-volume retailers, but predict your sales carefully. Always ask the landlord for an estimate of past operating costs and how they're allocated.

When comparing spaces, ask: What type of lease is used? Are CAM charges capped? Are increases based on operating budgets or indices? Each formula has trade-offs. As a general tip: negotiate everything– rent, increases, and who pays what before signing.

The Rights of Commercial Tenants

Commercial tenants in Ontario have fewer statutory rights than residential tenants. The law (Commercial Tenancies Act) provides some basic rules, but your rights largely come from the written lease. Notable points:

Contractual Freedom: Commercial leases are viewed as business contracts. Courts hold tenants to the bargain they signed. In practice, you must carefully negotiate favorable terms upfront, because once the lease is signed, you are legally bound by its provisions.
Quiet Enjoyment: By law, tenants have an implied covenant of quiet enjoyment. This means the landlord cannot unreasonably interfere with your use of the premises (for example, by unlawfully changing locks or blocking access). If the landlord breaches this duty, the tenant may sue for damages or injunctive relief. However, unlike residential tenancy law, there is no landlord-tenant board process for commercial quiet enjoyment claims, you must go to court.
Maintenance and Repairs: Unless the lease says otherwise, the tenant is usually responsible for interior maintenance and repairs. The landlord typically handles structure, roof, and common areas, but in a triple-net lease the tenant may assume those costs. Check whether the lease promises any repair obligations from the landlord; lacking that, the landlord has no duty to renovate or upgrade the space.
Security and Deposit: If you paid a security deposit, the landlord holds it (often for the entire term) to cover unpaid rent or damage. There is no legal requirement to pay interest on a commercial deposit. If the landlord wrongfully keeps the deposit at lease end, you would need to sue to recover it.
Unilateral Rent Increases: When the lease term ends, landlords may increase rent at their discretion. Unlike residential leases (where the Residential Tenancies Act caps rent hikes), commercial leases have no cap on increases after expiry. It's common for landlords to raise rent significantly once a lease expires. Tenants can only negotiate rent during renewal.
Enforcement Remedies: If a tenant fails to pay rent or breaches the lease, the Commercial Tenancies Act gives landlords strong remedies. For example, the landlord can end the tenancy and seize the tenant's business assets for owed rent. As a tenant, you cannot withhold rent even if the landlord breaches a repair obligation. You must pay on time or face eviction and damages.
Access to Courts: Commercial tenants settle disputes through Ontario's courts, not a tribunal. Small Claims Court can hear claims under $35,000 (for money/property disputes), and the Superior Court of Justice handles larger cases. There is no Landlord and Tenant Board for commercial issues. This means lawsuits can be lengthy and costly.

In summary, the lease governs your rights. You should ensure it contains any protections you need (repair promises, renewal options, fair-use language). If a lease term seems unfair or vague, get it fixed before signing. Once in the lease, it's enforceable as written.

Things to Consider About Commercial Lease Disputes

Disputes over commercial leases can arise from rent disputes, repairs, default, or misunderstanding of terms. Tenants should be aware of the following:

Read Your Lease Carefully: Each commercial lease is unique, and by law it can override default rules in the CTA. Clauses in the lease itself (e.g. about rent increases or repairs) will bind you, even if the CTA says otherwise. Don't assume government law will rescue you if your lease says something different.
Scope of Use: Make sure the lease clearly states what business activities are allowed. Disputes often occur if a tenant starts an unapproved use. If you want flexibility (e.g. to change from a retail store to a restaurant later), negotiate this in advance.
Negotiate in Good Faith: If a problem arises (e.g. landlord delays a promised build-out), approach the landlord first. Some conflicts can be resolved by discussion or mediation. However, be aware that unlike residential tenancies, mediation services are rare for commercial leases often the only recourse is litigation.
Litigate If Necessary: Commercial tenancy disputes usually end up in court. Unlike residential tenants, you cannot apply to the Landlord and Tenant Board. The law essentially forces you to "take [the landlord] to court" for issues like repairs, evictions, or unlawful rent increases. (Exception: You could make a claim in Small Claims Court for compensation up to $35,000.)
Enforce Your Rights: If the landlord breaches (for example, failing to maintain common areas or illegally entering without notice), you may have a claim for breach of contract or nuisance. If a tenant defaults (late rent, illegal use), the landlord can sue for rent due or evict. In any case, keep detailed records (rent receipts, emails, inspection photos).
Seek Legal Advice Early: Because commercial law can be complex, consult a lawyer as soon as a dispute arises. A legal expert can clarify whether you have any defenses (e.g. the landlord didn't give required notice of default) or if there are industry practices that might apply.
Remedies: If a lease is breached, remedies can include termination, damages, or specific performance. For example, if a tenant leaves early without permission, the landlord can sue for unpaid rent for the rest of the term. Conversely, if a landlord wrongfully evicts a tenant, the tenant could seek damages. Remember that court action is often the only path to resolve a serious dispute in commercial leasing.

Ultimately, the best approach is prevention: make sure the lease is clear and fair to avoid conflicts. But if a dispute cannot be resolved amicably, commercial tenants and landlords alike must use Ontario's civil court system to protect their rights.

Factors For Choosing The Ideal Lawyer For Your Business

A specialized commercial leasing lawyer is an invaluable ally when renting, renewing, or litigating a lease. Here are key factors to consider when selecting legal counsel for your business:

Relevant Experience: Look for a lawyer or law firm with a proven track record in commercial real estate and business leases. They should understand Ontario law (the CTA and contract principles) and have negotiated leases for other businesses.
Communication Skills: Your lawyer should explain complex legal terms in plain language and keep you updated. Test this in your initial consultation: do they listen and answer clearly? Clear, timely communication prevents surprises and keeps deals on track.
Negotiation Ability: A great lawyer is also a strong negotiator. They should be able to spot unfavourable clauses (like one-sided indemnities) and push for balanced terms.
Business Mindedness: The ideal lawyer thinks strategically about your business goals. Beyond legalities, they should advise on long-term risks and benefits (e.g. how a lease term affects expansion). An attorney should be "proactive" and help you understand the business impact of legal choices.
Accessibility and Service: Consider whether the lawyer has time for your project and a team to handle details. Ask how quickly they can start, and if they have support staff. Good availability can speed up lease negotiations and resolve issues before they escalate.
Fee Transparency: Commercial leases can be expensive to review. A reliable lawyer will be clear about fees (hourly vs. flat fee) and provide a retainer quote upfront. Compare a few lawyers cheaper isn't always better, but you should feel comfortable that billing practices are fair.
Reputation and Referrals: Check online reviews or ask other business owners for referrals. A lawyer's reputation for integrity and client service is important. Confirm they're in good standing with the Law Society of Ontario and have no disciplinary history.

Choosing the right lawyer is a critical business decision. A knowledgeable attorney will protect your interests (and sometimes money) by reviewing leases, negotiating terms, and, if needed, enforcing your rights in court. In the long run, the right legal counsel can save your business from costly mistakes.

How Pacific Legal Can Assist

At Pacific Legal, we understand that every commercial lease is different and that your business success depends on making the right choices from the start. Based in Ontario, our team offers practical, business-focused legal advice for entrepreneurs, retailers, and professionals across the province. Whether you're negotiating a new lease, renewing an existing agreement, or dealing with a lease dispute, we help you identify risks, protect your rights, and secure terms that support your growth. With experience in Toronto and other major commercial hubs, we provide reliable legal support tailored to your industry and location.

Conclusion

Renting commercial property in Ontario comes with many challenges but also opportunities. With careful planning, choosing the right location and lease type, understanding your contractual obligations, and knowing how to handle disputes- your business can secure a space that helps it grow. Remember that commercial leases are sophisticated legal documents: always review them closely and consider hiring an experienced commercial real estate lawyer. The right attorney will ensure the lease protects your interests and will help resolve any conflicts that arise. By following the factors and tips above, you can approach your commercial lease confidently and avoid surprises, making your new tenancy a foundation for success.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.