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Commercial Lease Agreement Ontario

Commercial Property

Commercial Lease Agreement Ontario

Are you looking for a commercial lease agreement in Ontario? We also have lawyers that can provide independent legal advice and contract reviews. A commercial property is complex in that you need to think about property tax, base rent, common areas, and automatic renewal. It’s always important to get legal advice before signing a contract. This is even more true with a commercial lease agreement.

Getting office space is required for many companies as they grow. It’s fine to work from home, Regus or WeWork when you start your company. But when you have fifty staff, you are going to need office space.

Don’t assume the terms that the landlord gives you are set in stone. You can hire a law firm to negotiate on the security deposits, automatic renewal, and base rent.

Book a consultation with one of our commercial lease lawyers in Toronto below. If you pick a time and date, the lawyer can call you directly at that time. Our lawyers are in Toronto, but can use Skype to work with you regardless of where you are in Ontario.

Customer Toll-Free: 

  1-844-466-6529

Negotiate a Commercial Lease

While a major consideration, negotiating a commercial lease agreement is more difficult than simply discussing rent. Rather, to negotiate a commercial lease well, there are a number of important considerations to be aware of. In fact, the first step in properly negotiating a commercial lease is to understand and evaluate one’s own needs. How much space do you need now? How much space will you need in the future? What is your budget? Where do you prefer to be located? By first considering your own needs at a high-level, you will be able to approach the negotiation with specific goals in mind.

Having understood your own needs, it is next important to understand the options available to you. For one, you should consider whether costs (like taxes, insurance, and utilities) will be covered in the base rent or not. For example, a gross rent lease will require the tenant to pay a single amount to the landlord, which covers base rent and any incidentals. Compare this with the various types of net leases (net, double net, and triple net leases) where the tenant pays for some incidentals directly. Other options, like the parties’ rights to terminate/renew the lease, competition clauses, repairs, signage, and alterations, etc. are all considerations that go into negotiations.

Handling Rent Increases

Handling Rent Increases

 

Legally speaking, there is no limit on how much a landlord can increase the rent each year under a commercial lease. Accordingly, commercial tenants should weigh the pros and cons of entering into a long-term lease in order to fix the cost of in the near future. While this may provide the tenant with stability, it may also lock the tenant into a lease that they later wish to get out of. Alternatively, the tenant and landlord may negotiate a short-term lease with options to renew at a specific base rent (whether fixed or variable based on the Consumer Price Index or other inflation index or market increases).

Assignment and Subletting

 

The landlord and tenant relationship typically result in a power imbalance in favor of the landlord. Such control typically is especially exerted by landlords in their ability to prevent tenants from transferring the lease to another party (i.e. an assignment of the lease) and/or leasing the rented space to another tenant (i.e. subletting). May commercial leases provide that a tenant cannot assign or sublet without the landlord’s prior consent, which may make it difficult for a tenant looking to sell its business. If being able to freely assign or sublet is important to the tenant, then the tenant should consider negotiating such that (i) the tenant can assign or sublet without the landlord’s consent; or (ii) the tenant can assign or sublet with the landlord’s consent, but the landlord must consent within a specified time period and cannot unreasonably withhold consent.

Obtaining Additional Space

If a tenant is experiencing or expecting high growth, the space rented under a commercial lease may be insufficient in the future. Accordingly, such tenants should consider negotiating the commercial lease agreement to provide for certain rights of expansion. For example, a tenant may negotiate a right of first offer, which gives the tenant the first right to offer lease space if it becomes available. Similarly, a tenant may negotiate for a right of first refusal, which gives it the right to match any third-party offer made on the vacant premises. However, tenants should be aware that such rights do not guarantee them such additional space (as these rights only arise upon space becoming available). Accordingly, a tenant should be aware of the likelihood of such spaces becoming available and should negotiate accordingly.

Customer Toll-Free: 

  1-844-466-6529

Written Agreement

You will also need to discuss who will be responsible for the property tax. Your companies success will be partly subject to our terms of the agreement you sign. If you are a landlord, your entire business success will be subject to our terms of the lease agreement.

A residential lease is completely different than a business property lease. It’s important that the parties agree on all the terms. It’s helpful to provide examples of why leases are so important.
We once had a client who had a small claims lease dispute. It was a commercial lease that was agreed upon and confirmed by email. There were no terms minus the base rent. After moving into the space, it was obvious that the wifi didn’t work. It wasn’t clear who was responsible to pay for the upgrade. After a few months, the landlord wanted to update all the carpet in the office. The tenant was sent a bill for $4000. The tenant did not want to pay.
Written Agreement

Landlord And The Tenant

The tenant decided to move out of the space. There were no terms in the email that confirms the lease agreement on how much notice should be provided. The tenant had paid for January, February, and March. Therefore, at the end of March, the tenant moved out all their stuff of the office after hours. The next day, the landlord was looking for their payment for April, May, and June. The tenant confirmed they had moved out of the office and would not be paying.
The commercial landlord said that it was three months at a time lease. Further, at least three months’ notice was required. The tenant obviously did not agree as they had already moved out of the office. The landlord said they were going to file a small claims action to recover their three months rent.
Of course, the tenant avoided being served with the papers. It wasn’t worth it for the landlord to spend tons of money trying to find the tenant. They also could have filed a motion with the court to serve the tenant by email. However, this all costs money. It wasn’t worth it over $4500 of rent. Normally it’s not worth it to file a lawsuit unless it’s big enough.
Commercial Property

Security Deposits For A Commercial Lease Agreement

We have real estate lawyers that focus on commercial lease lawsuits. If someone signed an agreement to pay you $20,000 of rent for 36 years, it could be worth $720,000. It is obviously worth it to hire a lawyer to file a lawsuit for $720K. If you spend $20,000 on legal fees to get $720,000, it’s worth it.
Some people have been attracted to models like WeWork because they offer month to month leases. This get’s companies out of the risk of taking on $720,000 of risk.

Commercial Lease Agreement Ontario

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Landlords And Tenants

A business lawyer can help you with:

  • how many months rent is due upfront
  • the terms around written notice
  • discuss the term of the lease
  • the leasing agreements
  • negotiate on the base rent
  • seeing if a month to month tenancy is possible

In conclusion, if you are looking for a Commercial Lease Agreement in Ontario, speak to one of our lawyers today. You can also learn about Canadian law on Youtube.