A commercial lease in Ontario is a binding business contract governed mainly by the Commercial Tenancies Act and by the terms you negotiate, not by the tenant protections that cover homes. In practice that means almost everything is open to negotiation and almost nothing is handed to you by statute, so the words on the page decide what you pay and what you can do for the next several years.
Residential tenants get rent control, a standard lease, and a tribunal that hears disputes. Commercial tenants get none of that. The law sets only a thin layer of default rules and lets your contract override most of them, which is why a lease you sign in an afternoon can shape your costs and your options for the rest of the term. This guide walks through the lease structures used in Ontario, the clauses that decide whether the deal works for you, what a landlord can do if you fall behind, how the leasing process runs, and what legal help costs.
How a commercial lease differs from a residential lease
A commercial lease lets a business occupy a landlord’s space for a set term in exchange for rent, and it sets out each side’s rights and obligations. The defining difference is the law behind it. Residential tenancies fall under the Residential Tenancies Act, with rent control, a mandatory standard lease, deposit limits, and the Landlord and Tenant Board to resolve disputes. Commercial tenancies fall under the Commercial Tenancies Act, which provides only a small set of default rules and lets your contract displace most of them.
That has real consequences. There is no rent control on commercial space. There is no standard form lease. There is no government mediator. And there is no Landlord and Tenant Board for commercial disputes. A money or property claim up to 50,000 dollars goes to Small Claims Court, and anything above that goes to the Superior Court of Justice. Because the statute gives you so little, your protection comes almost entirely from the lease itself.
| Feature | Residential tenancy | Commercial tenancy |
|---|---|---|
| Governing law | Residential Tenancies Act | Commercial Tenancies Act plus your contract |
| Rent control | Yes, annual guideline applies to many units | None, set by the lease |
| Standard lease form | Mandatory standard form | No standard form, fully negotiated |
| Deposit rules | Limited, regulated | Not regulated, negotiated |
| Where disputes go | Landlord and Tenant Board | Small Claims to 50,000 dollars, otherwise Superior Court |
| Consumer protection | Strong | Limited, you negotiate your own protection |
What to do. Treat the lease as the source of your rights. If a protection matters to you, it has to be written into the agreement, because the law will not supply it.
Which lease structure fits your business
Ontario does not prescribe a standard commercial lease, so landlords use several rent structures. The structure decides how much of the building’s operating cost you carry on top of base rent, and it is the single biggest driver of your true monthly cost.
Gross lease
You pay one fixed rent and the landlord covers property taxes, insurance, and maintenance out of it. Simple to budget, common for smaller office space.
Net leases
You pay base rent plus some or all of the building’s operating costs. A single net lease adds property taxes. A double net lease adds taxes and insurance. A triple net lease adds taxes, insurance, and maintenance, so you carry almost every cost of occupancy. Triple net is the norm for retail and industrial space in Ontario.
Percentage lease
You pay a base rent plus a percentage of your gross sales once sales pass a set threshold. Common in malls and high traffic retail.
Modified gross lease
A blend. You and the landlord split operating costs in a way you negotiate, often base year stops with you paying increases above that base.
| Lease type | What base rent covers | What you pay on top | Often used for |
|---|---|---|---|
| Gross | Taxes, insurance, maintenance | Usually nothing extra | Smaller office |
| Single net | Insurance, maintenance | Property taxes | Single tenant buildings |
| Double net | Maintenance | Taxes and insurance | Office and mixed use |
| Triple net | Little, base rent is rent only | Taxes, insurance, maintenance | Retail and industrial |
| Percentage | Varies | A share of gross sales | Mall and high traffic retail |
| Modified gross | A negotiated split | Increases above a base year | Multi tenant office |
What additional rent actually costs you
On a net lease, the rent you negotiate is only part of the bill. The rest is additional rent, sometimes called TMI for taxes, maintenance, and insurance, or CAM for common area maintenance in multi tenant buildings. It can include property taxes, building insurance, repairs, snow removal, landscaping, security, utilities for common areas, and a management fee.
Most leases let the landlord estimate additional rent at the start of the year and reconcile to actual cost later, which can produce a true up charge you did not expect. Watch for a gross up clause that lets the landlord bill common costs as if the building were fully occupied, and look for the right to review the landlord’s records so you can check the math.
What to do. Ask for the current additional rent figure per square foot, the most recent reconciliation, and a cap on the controllable portion. Budget for the all in number, not the base rate.
The clauses that decide whether the lease works for you
A commercial lease is long, and a handful of clauses do most of the work. These are the ones we read first.
- Permitted use and exclusivity. The use clause limits what you can run in the space, and it must match municipal zoning. An exclusivity clause stops the landlord from leasing nearby units to a direct competitor.
- Assignment and subletting. Check whether you can transfer the lease or sublet, and whether the landlord’s consent cannot be withheld unreasonably. This is your exit if the business changes.
- Renewal or option to renew. Note the exact notice window and how renewal rent is set. Miss the window and you can lose the space. See our guide on the option to renew a commercial lease for the traps in this clause.
- Demolition and relocation. Many leases let the landlord end your term or move you to another unit on notice. Know whether one applies and what compensation you get.
- Repair and return condition. Confirm who handles structure, roof, and HVAC, and what condition you must leave the space in. Restoration costs at the end surprise many tenants.
- Deposit and prepaid rent. There is no statutory limit, so the amount and the conditions for return are whatever you negotiate. Define them clearly.
- Insurance and indemnity. You will carry liability and contents insurance and indemnify the landlord. Look for a mutual release and a waiver of subrogation so your insurers do not chase each other.
- Personal guarantee. Landlords often ask the owner to guarantee the lease personally. Push to cap the amount and to end the guarantee after a set period or on assignment.
- Fixturing period and allowance. Negotiate rent free time to build out the space and a tenant improvement allowance if the work benefits the landlord.
What to do. Read these clauses before you sign anything, including a letter of intent, because once a term is conceded it is hard to claw back.
Does the lease have to be in writing
Usually, yes. Under Ontario’s Statute of Frauds, a lease for a term of more than three years must be in writing and signed to be enforceable. A lease of three years or less can in theory be created without writing if the rent is at least two thirds of the full value of the space, but you should always put it in writing anyway.
Here is the trap most people miss. A short term lease that carries an option to renew, where the renewals could run past three years, is treated by the courts as a lease over three years and must be in writing. So a two year lease with two further two year options is caught.
You can also register a notice of lease on title to protect your position if the property is sold or refinanced. Note that the rules and any registration steps can change, so confirm the current requirements before you rely on them.
What to do. Put every commercial lease in writing, signed by both sides, and ask whether registering a notice of lease makes sense for your term.
What a landlord can do if you fall behind on rent
This is where commercial tenants get caught out, because the landlord has powerful self help remedies and very little process to follow. There are two main routes, and the landlord generally has to choose one, not both.
- Distress, also called distraint. The landlord can seize and sell your goods on the premises to cover the arrears while the lease continues. There are limits on what can be taken and how a sale must run, but the remedy is real and fast.
- Termination and forfeiture. The landlord can end the lease and take back the space. Once a landlord does this, for example by changing the locks, it gives up the right to seize and sell your goods.
The election rule matters. A landlord cannot both terminate the lease and distrain on your goods for the same default. A landlord who locks you out and then tries to sell your inventory has usually overstepped. Knowing this can change the whole conversation.
If the landlord ends the lease, you are not always out for good. Under section 20 of the Commercial Tenancies Act you can apply to the Superior Court for relief from forfeiture, usually by paying the arrears and the landlord’s costs. Courts can let a tenant back in, but they will not rewrite the lease to make it fairer. The Ontario Court of Appeal confirmed that limit in the Hudson’s Bay and Oxford Properties case.
What to do. If you are locked out or served with a notice, call a lawyer the same day. Relief from forfeiture is time sensitive, and the longer you wait the harder it gets.
How the leasing process works, step by step
Most commercial deals move through the same stages. Here is how the process runs when we act for a tenant.
- Offer to lease or letter of intent. Often binding in part, so we review it before you sign rather than after.
- Due diligence. Confirm zoning and permitted use, check the building’s condition, review the additional rent history, and verify the measured area of the space.
- Lease review and markup. We send you a plain language summary of the risks and a redline of the changes we recommend.
- Negotiation. We deal with the landlord or their lawyer to settle the open terms.
- Signing, deposits, and guarantees. Final documents, funds, and any guarantee or insurance certificates.
- Fixturing and possession. You take the space, complete any build out, and start the term.
The mistakes we see most often
These are the errors that cost commercial tenants the most. Outcomes always turn on the facts, but the pattern is consistent.
- Treating the quoted rate as the full cost. Ignoring additional rent can add thousands a year you did not budget for.
- Signing a personal guarantee with no cap or end date. You can stay personally liable long after the business closes.
- Missing the renewal notice window. You can lose the space or face a rent reset to market.
- No assignment or sublet flexibility. You stay on the hook for rent after you outgrow or exit the space.
- Overlooking a demolition or relocation clause. You can be forced to move on short notice with little compensation.
- Skipping legal review. A review costs far less than the dispute it prevents.
In a commercial lease the law gives you almost nothing for free. Your protection is whatever you negotiated into the contract, which is why we read every clause before a client signs.
Demet Altunbulakli, Owner and Founding Lawyer
Frequently asked questions
Is a security deposit allowed on a commercial lease, and is there a limit?
There is no statutory cap and no deposit rules like the ones for residential tenancies. Landlords commonly ask for first and last month plus a security deposit, and everything about it is negotiable. Make sure the lease states the amount, what it can be used for, and the conditions for its return.
Can my landlord raise the rent during the term?
Only if the lease allows it. Commercial rent is not controlled, so base rent is usually fixed for the term unless the lease includes a scheduled escalation. At renewal, rent is whatever you negotiate, often set to market, which is why the renewal clause matters so much.
Can the landlord lock me out if I miss rent?
Possibly, if the lease and the Commercial Tenancies Act allow the landlord to end the lease and retake the space. The landlord must follow the lease, and cannot both terminate and seize your goods for the same default. If you are locked out, you may be able to apply to the Superior Court for relief from forfeiture, so act quickly.
Can I get out of a commercial lease early?
Usually only by assigning or subletting, by negotiating a surrender with the landlord, or by using a break clause if the lease has one. Otherwise you remain liable for the rent, and a personal guarantee can follow you even after you hand back the keys.
Do I need a lawyer to review a commercial lease?
It is not legally required, but the lease is where your protection lives, and the cost of a review is small next to the cost of a dispute. A review also gives you a clear list of changes to ask the landlord for before you sign.
What is additional rent and why is my bill higher than the base rent?
Additional rent is your share of the building’s taxes, insurance, maintenance, and operating costs, often called TMI or CAM. On a triple net lease it can come close to the base rent, so always ask for the current figure per square foot before you sign.
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.
