Legal Expertise You Can Count On
Signing a commercial lease is a major commitment, whether you’re opening your first storefront or expanding your business across Ontario. Unlike residential leases, commercial leases are complex legal contracts that often involve customized terms—and getting it wrong can result in unexpected costs or long-term liabilities.
As a real estate lawyer, I help clients understand their commercial lease agreements before signing. Here are some of the most important elements to consider when negotiating or reviewing your lease:
Fixed vs. Percentage Rent: Know What You’re Paying
Commercial lease payments are typically structured in one of two ways: fixed rent or percentage rent. A fixed rent structure provides predictable monthly costs. In contrast, a percentage rent lease requires tenants to pay a base rent plus a percentage of business revenue—common in retail leases.
Understanding the structure you’re agreeing to is crucial. Percentage rent can make sense for newer businesses or seasonal operations, but it must be negotiated carefully to avoid financial strain during high-earning periods. A lawyer can help you model different scenarios and spot red flags.
Maintenance and Repairs: Who’s Responsible for What?
One of the most overlooked issues in commercial leases is maintenance and repair obligations. Tenants are often surprised to learn they may be responsible for maintaining HVAC systems, structural elements, or even the roof.
Your lease should clearly define which party is responsible for routine maintenance, emergency repairs, and capital replacements. A well-drafted lease will also outline how costs are shared in multi-tenant properties. Don’t assume these terms are standard—every lease is different.
Exit Strategies & Early Termination Clauses
A commercial lease might span 5, 10, or even 15 years. But what happens if your business needs change before the term is up?
Look for provisions that allow for early termination, subleasing, or assignment. These exit strategies can protect you from significant penalties and give you flexibility if you outgrow the space or need to downsize. Always ensure the lease includes clear language around notice periods, penalties, and mutual termination options.
Liability and Insurance: Protecting All Parties
Most landlords will require tenants to carry commercial general liability insurance, but the exact coverage and limits should be reviewed carefully. The lease should also specify who is responsible for damages caused by fire, flood, or accidents on the premises.
Confirm that the lease includes indemnity clauses, defines liability for common areas, and outlines who pays the deductible if insurance is used. These clauses can greatly impact your legal exposure and out-of-pocket costs in the event of a claim.
Legal Review is Essential
Every commercial lease is negotiable. Before signing, work with a qualified real estate lawyer in Ontario who can explain your rights, identify risks, and ensure your lease aligns with your business goals.
Have questions about a commercial lease? Contact us today for a detailed review or lease negotiation support. Your success starts with a sound legal foundation.