An option to renew is a clause in your commercial lease that gives you, the tenant, the right but not the obligation to extend your tenancy for a further term after the original term ends. It only protects you if you exercise it exactly as the lease says, in writing and inside the deadline, because Ontario gives commercial tenants no automatic right to stay once a lease expires.
That one clause often decides whether a business keeps its location or has to move. In our real estate practice, the renewal option is one of the most overlooked parts of a lease when clients sign and one of the most disputed when the term runs out. This guide walks through how the clause works in Ontario, how the renewal rent gets set, what happens if you miss the deadline, and the mistakes we watch cost tenants their space.
What is an option to renew in a commercial lease?
An option to renew is a contractual right written into your lease before you sign. It lets you extend the lease for a further defined period, often one to five years, on terms the lease sets out in advance. The choice is yours. You can exercise it, or let it lapse and walk away.
Three parts of the clause do the heavy lifting.
- The notice window. The lease sets the period during which you must tell the landlord you are renewing, commonly somewhere between six and twelve months before the term ends. Miss it and the right usually disappears.
- The renewal terms. The clause states how many renewal periods you get and how long each one runs. Five separate three year options give you more flexibility than one fifteen year commitment.
- The rent and the conditions. The clause says how the rent for the new term is set and what you must do to qualify, which almost always includes being current on rent and free of any default.
Is there an automatic right to renew a commercial lease in Ontario?
No. Commercial leases in Ontario fall under the Commercial Tenancies Act, and that statute gives tenants far less protection than residential tenants get. There is no rent control, no standard lease form, and no automatic right to renew. When your term ends, your landlord is free to let the lease lapse, offer the space to someone else, or quote a much higher rent.
This is the part that surprises new business owners most. Residential tenants can turn to the Landlord and Tenant Board and the Residential Tenancies Act for a safety net. Commercial tenants have neither. Your protection lives entirely in the lease you negotiated. Commercial disputes are also resolved in court rather than before a tribunal. As of October 1, 2025, the Small Claims Court handles money and property claims up to $50,000, and larger claims go to the Superior Court of Justice. You can read the province’s overview of renting commercial property in Ontario for the basics.
The practical takeaway is simple. The only thing standing between you and a forced move at the end of your term is a renewal clause you put in the lease at the start. Treat it as a core business term, not boilerplate.
Renew or extend, and why the word in your clause matters
People use renew and extend as if they mean the same thing. In a lease they can carry different legal effects. A renewal can create a fresh lease for the new term, while an extension simply continues the existing lease for longer. What controls is how the clause is written, not the label on it, but the difference can matter in ways tenants rarely expect.
Two practical consequences come up often. First, guarantees. If a director, parent company, or individual guaranteed the original lease, a true renewal may not carry that guarantee into the new term unless the wording says so, and a landlord who wants continued security will push to keep it alive. Second, paperwork. A renewal may need a new signed document, while a carefully drafted extension can flow from the original lease. Before you exercise, confirm what your clause actually triggers so there are no surprises about who is on the hook and what has to be signed.
How is the renewal rent set?
Rent for the new term is where most renewal fights happen. The lease should spell out the method in advance. The four approaches below are the ones we see, each with its own balance between certainty and fairness.
| Method | How it works | What to watch for |
|---|---|---|
| Fixed amount | The lease names the exact rent for the renewal term, set in advance. | Total certainty, but a figure fixed years earlier can sit well above or below the market when the time comes. |
| Stepped or percentage increase | Rent rises by a set amount or percentage, for example three percent a year. | Predictable and easy to budget. Confirm how the percentage compounds over a long term. |
| Linked to the Consumer Price Index | Rent moves with inflation using a published index. | Fairer than a flat guess, but in high inflation years the jump can be steep. Consider a cap. |
| Fair market rent | Rent resets to what comparable space rents for at renewal, often confirmed by appraisal. | The most common and the most argued. It must be defined, with an appraisal or arbitration fallback if you cannot agree. |
There is one drafting trap that quietly destroys renewal rights. If the clause says the rent will simply be an amount to be agreed between you and the landlord, with no formula and no fallback, an Ontario court may find it unenforceable. The law does not force two parties to agree, so a bare agreement to agree can be void for uncertainty, and the renewal right goes down with it. In a 2024 decision, the Superior Court of Justice held exactly that about a renewal clause that left the rent to be agreed. A renewal does not fail just because the rent is not fixed in advance, but only if the lease gives a way to work it out, such as a fair market rent standard or a reference to arbitration. If your clause leaves rent open with no mechanism, fix it before you rely on it.
How and when do you exercise the option to renew?
You exercise the option by giving the landlord written notice that you are renewing, delivered within the window the lease sets and in the manner it requires. You usually also have to be current on rent and free of any default. Do all of that and your right is secure. Get any part wrong and you may lose it.
Two points carry more weight than tenants realize. Time is of the essence, which means the deadline is hard. Courts treat renewal deadlines as strict, and the Ontario Court of Appeal has confirmed that a landlord has no duty to remind you a deadline is coming and that staying silent about it is not bad faith. So do not wait for a nudge that is never coming. Deliver your notice exactly how the lease says, whether that is by registered mail, courier, or email to a named person, and keep proof that you sent it on time.
So what do you do? The simplest protection costs nothing. The day you sign your lease, put the renewal notice deadline in your calendar with reminders months ahead, and treat it like a court filing date.
What happens if you miss the renewal deadline?
Normally you lose the right to renew and the space goes back to the landlord. That is the starting point, and you should never plan around any other outcome. There is a narrow safety valve, but it is the exception, not the rule.
Ontario courts can grant what is called relief from forfeiture under section 20 of the Commercial Tenancies Act and section 98 of the Courts of Justice Act. This is a discretionary remedy, and judges weigh the whole picture. They look at whether the missed deadline was an honest slip, whether you acted quickly the moment you realized, whether the landlord would be unfairly hurt, for example because the space is already leased to someone else, and whether you have invested heavily in the premises. In a 2025 case, a restaurant tenant who missed the deadline while dealing with illness, then moved fast to put it right, was allowed to keep the lease through 2030. In other cases courts have refused, especially where the tenant was a sophisticated business that simply ignored the deadline.
Whether relief is granted turns entirely on the facts, and the result is hard to predict. If you have missed your deadline, the right move is to write to your landlord immediately to confirm you intend to renew, document everything, and speak with a lawyer the same day. The faster and cleaner your response, the better your position. But do not count on a court to rescue a deadline you can simply meet.
What if you stay on without renewing? Overholding and double rent
If your term ends and you stay in the space without exercising a renewal or signing a new lease, you are overholding, and it can get expensive. Under section 58 of the Commercial Tenancies Act, a tenant who willfully holds over can be liable for double the rent set out in the lease. Many leases also include an overholding clause that converts the tenancy to month to month, often at a premium of around 115 to 150 percent of the old rent, terminable on short notice.
Overholding also turns on landlord consent. If the landlord refuses to let you stay and does not accept your rent, you have no right to remain. If the landlord accepts rent after the term ends, that usually signals consent to the overholding. Either way, overholding is a stopgap, not a plan. It leaves you paying more for less security. Renewing properly is almost always the better route.
Why the renewal option matters when you sell your business
If you ever plan to sell your business, the renewal option can affect both the price and whether the deal closes. A buyer is purchasing your location, your goodwill, and your customer base, and they want confidence they can stay. A lease with little time left and no renewal rights makes buyers nervous and can shrink your sale price or scare them off.
Selling usually means assigning the lease to the buyer, which needs the landlord’s consent. The Commercial Tenancies Act says a landlord cannot unreasonably withhold consent to an assignment or sublet unless the lease flatly prohibits it, but the lease terms still drive the process. If you are thinking about selling, look at your remaining term and renewal rights early. Our guide to buying a business in Ontario covers how lease terms fit into a sale, and our business law team can review the lease alongside the deal.
What tenants and landlords each gain and give up
A renewal option is not one sided. It helps both parties, and each gives up something for it.
For a tenant, the upside is continuity and control. You keep the location your customers know, you protect the money you put into the space, and if the rent method is sound you gain predictability over your largest fixed cost. The trade is that you commit to a process and, depending on how rent is set, you may not capture every dip in the market.
For a landlord, a renewal keeps a known, paying tenant in place, smooths income, and avoids the cost of marketing and filling an empty unit. The trade is reduced flexibility. The landlord is bound to offer the renewal on the agreed terms and gives up the chance to repackage the space or chase a higher rent during the renewal term. Sound drafting on both sides, with a fair rent mechanism and clear conditions, is what makes the clause work.
The mistakes we see most often, and what they cost
Most renewal problems are not bad luck. They come from a handful of avoidable errors. Here are the ones that cost clients the most.
- Leaving rent to be agreed with no formula. The clause can be unenforceable, which means you may have no renewal right at all when you need it.
- Missing the notice window. This is the big one. Miss the deadline and you can lose the space, the goodwill, and every dollar you spent improving the premises.
- Assuming the landlord will remind you. There is no duty to remind you, and some landlords stay quiet on purpose because a vacant or repriced unit suits them.
- Not checking whether a guarantee carries forward. You can end up personally on the hook for a renewal term you thought was clean, or lose a guarantee the landlord assumed continued.
- Ignoring additional rent. Base rent is rarely the whole story. Property taxes, insurance, and common area costs are not capped by statute and often reset, so your real occupancy cost can jump even when base rent looks steady.
- Treating overholding as a renewal. Staying put without renewing exposes you to double rent and month to month insecurity instead of a locked term.
Commercial lease renewal checklist
Use this list whether you are signing a new lease or approaching a renewal date.
- Confirm your lease actually contains a renewal or extension right, and read it word for word.
- Note the exact notice window and the required method of delivery.
- Put the deadline in your calendar the day you sign, with reminders several months out.
- Check the conditions you must meet, usually no default and rent current.
- Confirm how the renewal rent is set, and that there is a fallback such as fair market rent or arbitration.
- Find out whether additional rent like taxes and operating costs is capped.
- Check whether any guarantee carries into the renewal term.
- Start the conversation early, ideally twelve months or more before expiry.
- Deliver your notice in writing, on time, and keep proof.
- Have the renewal or extension properly documented before the old term ends.
Frequently asked questions
How much notice do I have to give to renew a commercial lease in Ontario?
It depends on your lease, because there is no statutory default for commercial renewals. The window is whatever your clause says, and in practice it often falls somewhere between six and twelve months before the term ends. Some leases also set an earliest date, so you cannot give notice too soon either. Read the clause carefully and diarize the exact dates, because the deadline is strict.
Can my landlord refuse to renew if I have a renewal option?
If you hold a valid option, exercise it properly and on time, and meet the conditions such as being current on rent, the landlord is bound to honour it. The friction usually comes from rent. If the option sets renewal rent at fair market value and you cannot agree on the number, you may end up in a dispute or arbitration over the figure rather than over your right to stay. Without an option, the landlord has no obligation to renew at all.
My lease says renewal rent will be agreed later. Is that a problem?
It can be a serious problem. A clause that leaves rent simply to be agreed, with no formula and no way to break a deadlock, may be unenforceable, which can take your renewal right down with it. If that describes your lease, do not wait until renewal to find out. Have it reviewed now so it can be fixed by agreement while both sides are still willing.
I missed my renewal deadline. Is there anything I can do?
Possibly, but do not assume it. Ontario courts can grant relief from forfeiture in limited cases where the miss was inadvertent, you acted quickly, and the landlord is not unfairly prejudiced. It is discretionary and fact specific, and plenty of tenants have been refused. Act immediately. Write to the landlord to confirm you want to renew, keep records, and call a lawyer the same day. Speed and good faith matter.
Do commercial lease disputes go to the Landlord and Tenant Board?
No. The Landlord and Tenant Board handles residential tenancies only. Commercial disputes go to court. Since October 1, 2025, money and property claims up to $50,000 can be brought in Small Claims Court, and anything larger goes to the Superior Court of Justice. Commercial litigation is slower and costlier than the residential tribunal route, which is one more reason a clear lease matters so much.
Should I exercise my option or try to negotiate a new lease?
It depends on what your option gives you. If it locks in favourable rent or terms, exercising it is usually the safer move. If your renewal rent resets to market anyway, you may have room to renegotiate other terms at the same time, such as an improvement allowance or a cap on operating costs. We often compare both paths with clients before they commit.
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.
