A commercial lease is one of the biggest contracts your business will ever sign — often a five- or ten-year commitment worth hundreds of thousands of dollars. And unlike residential tenants, commercial tenants in Ontario get almost no statutory protection. Whatever the lease says is, for the most part, what you get.
Landlords draft these leases. Their lawyers have refined them over decades. Here are the red flags we look for before a client signs.
1. “Additional rent” that’s bigger than the rent
The advertised rate is almost never what you’ll pay. Most commercial leases are net leases: on top of base rent, you pay a share of property taxes, insurance, utilities, and common area maintenance (TMI or CAM charges). Red flags:
- No cap on annual CAM increases
- Vague language letting the landlord recover “management fees” or capital repairs (a new roof shouldn’t be your problem)
- No right to audit the landlord’s expense statements
Always ask for the last two years of actual TMI figures before signing.
2. Personal guarantees with no exit
Landlords routinely ask the business owner to personally guarantee the lease. Sign an unlimited guarantee and your house is backing a ten-year lease — even if the corporation fails in year two. Negotiate limits: a cap (e.g., 12 months’ rent), a burn-off after a few years of good payment history, or an indemnity limited to specific losses. If you’re asked to sign a guarantee, that’s a classic situation for independent legal advice.
3. Demolition and relocation clauses
Buried in many leases is a clause letting the landlord terminate on short notice to demolish or redevelop, or relocate you elsewhere in the building at their discretion. If you’re investing in leasehold improvements — a restaurant build-out, a clinic fit-up — a demolition clause can wipe out your investment overnight. At minimum, negotiate compensation for unamortized improvements.
4. A use clause that’s too narrow
If your permitted use is “sale of coffee and baked goods” and you later want to add sandwiches, catering, or a liquor licence, you may need landlord consent you can’t get. Push for the broadest use clause possible — and confirm zoning actually permits your use before signing. The lease saying you can operate doesn’t mean the municipality agrees.
5. No verification of the landlord itself
Is the party signing actually the registered owner? Is there a mortgage on the property? If the landlord defaults on its mortgage, the lender can potentially terminate your lease — unless you have a non-disturbance agreement requiring the lender to honour your tenancy. A title search takes minutes and can reveal problems the landlord didn’t mention.
6. Weak or missing renewal rights
Your location is your business. Without a renewal option, you’re negotiating from zero when the term ends — after you’ve built goodwill at that address. Red flags: no renewal option at all, renewal rent “as determined by the landlord,” or renewal conditional on never having breached the lease (one late payment could void it). Aim for defined renewal terms with rent set by market rate and arbitration if you can’t agree.
7. Assignment and subletting handcuffs
Life happens — you may sell the business, restructure, or need to downsize. Watch for: consent that can be withheld arbitrarily, the landlord’s right to terminate instead of consenting (a “recapture” clause), or a change-of-control provision that treats selling your company’s shares as an assignment. Any of these can block or complicate the sale of your business.
8. Repair obligations that make you rebuild the building
“Tenant shall repair and maintain the premises” sounds harmless until it obligates you to replace the HVAC system or comply with structural orders. Make sure structural elements, the roof, and building systems stay the landlord’s responsibility, and that your obligations exclude reasonable wear and tear.
9. Offer to lease treated as “just a formality”
The offer to lease is usually binding. Sign it casually and you’ve agreed to the deal — the landlord’s standard-form lease that follows can be near-impossible to renegotiate. Get legal review at the offer stage, not after. This is when you have leverage; a landlord with a signed offer has little reason to concede anything.
10. Free rent that isn’t free
Inducements — free rent periods, tenant improvement allowances — often come with a clawback: default at any point and the full value becomes immediately repayable. Understand exactly what triggers repayment before counting on the incentive.
The bottom line
Commercial leases are enforced as written, and they’re written by the landlord. A legal review before you sign — ideally before you sign the offer — costs a fraction of one month’s rent and can save you from a decade-long mistake.
Signing a commercial lease in Ontario? Barbarian Law™ reviews offers to lease and commercial leases for tenants — flagging the risks, negotiating the fixes, and confirming title and zoning before you commit.
📞 Contact Barbarian Law to have your lease reviewed before you sign.
This article is general information, not legal advice. Every situation is different — speak with a lawyer about yours.
