Toronto Commercial Lease Review: Terms to Check Before Signing

Define the business deal before reviewing clauses

Before committing to commercial premises, check the proposed lease against the way your business will operate. A quiet professional office, a restaurant and a workshop may need very different protections even when their rents are similar. Start with a one-page brief describing the space, intended use, opening date, equipment and growth plans. This article provides general information and is not legal advice.

Send your lawyer the proposed lease, offer or letter of intent, schedules, floor plans, building rules and important correspondence. Ask whether any preliminary document is already binding and whether a review condition is available before you sign.

Ontario explains that there is no standard commercial lease and that a signed lease may take precedence over provisions of the Commercial Tenancies Act. The specific wording matters. Read the province's commercial-property guidance.

Identify your essential terms separately from preferences. For example: approval for a particular use may determine whether the location works at all, while an extra parking space may be negotiable.

Ask for the full cost, year by year

Ask your lawyer to identify every payment category and your accountant to help model the financial effect. BDC's commercial leasing terminology guide distinguishes base-rent structures, additional expenses and tenant improvements. A label such as “net lease” is a starting point for questions, not a complete cost description.

• How is the rentable area measured, and can the chargeable area change?
• Which taxes, insurance, maintenance, utilities and management costs can be passed through?
• Are capital replacements included, excluded or spread over time?
• What estimates, statements and supporting records will the landlord provide?
• Are increases fixed, indexed or determined another way?
• What payments apply during a fixturing or rent-free period?

Request a worked example using the proposed lease terms. Show the first year, an ordinary later year and a year with a major expense. Mark unknown figures clearly. Ask whether caps, exclusions or review rights could make the cost easier to evaluate.

Check use, approvals and physical access

Describe your proposed activities precisely: retail sales, customer visits, food preparation, deliveries, storage, production or late hours. Ask whether the permitted-use clause covers them and whether future changes require consent. Check signage, loading, parking, waste handling and access outside normal building hours.

Landlord approval is one part of the picture. Toronto offers zoning reviews addressing property use and business-licence applications. Ask which review is appropriate and who will obtain it before you commit. The City's zoning-review page explains the available routes.

For food premises, Toronto specifically advises checking additional legislation and bylaws before signing a lease. Its food-business guidance is a useful starting point.

Ask what happens if an essential approval is refused or delayed. A location may look ready while still needing drawings, inspections or modifications. Put the agreed responsibility, cost and deadline into the proposed transaction documents for legal review.

If the proposed tenancy depends on a new exterior sign, prepare a storefront sign brief alongside the questions about signage rights in the lease.

Allocate improvement and repair responsibilities

Walk through the premises with the right technical adviser and document its condition. Ask the lawyer to connect that information to the lease: what the landlord delivers, what you install, who approves the work and who pays when something fails. A legal review does not measure electrical capacity or establish the remaining life of a rooftop unit.

Separate initial improvements from routine maintenance, replacement and end-of-term restoration. BDC recommends addressing leasehold improvements and termination provisions during negotiation; see its lease-negotiation guide.

• When is an improvement allowance paid, and what proof is required?
• Who bears delays before the space is ready to open?
• Who handles structural, roof and major mechanical work?
• What happens after fire, flooding or an interruption of access?
• Which installations can you remove, and what must be restored?

Ask for ambiguous responsibilities to be resolved in writing. An informal promise to “take care of the HVAC” needs a defined scope before you can budget around it.

Read the guarantee, renewal and exit together

Ask who is committing to the lease: the operating company, an individual, a guarantor or several parties. If personal security is requested, ask about its amount, duration, release conditions and possible alternatives. Explain planned changes in ownership or financing so the lawyer can review the relevant consent provisions.

Then discuss three scenarios: the business succeeds and needs more room; you want to sell it; or the location no longer works. Ask how assignment, subletting, relocation, demolition and early-termination clauses respond to each situation. Do not assume handing the keys back ends a fixed-term obligation.

For renewal, identify the notice window, delivery method, conditions and method of setting the new rent. Ask whether an option belongs only to the original tenant and whether a default could affect it.

Put future notice dates in your operating calendar. A valuable right is harder to use if nobody knows when to exercise it. Ask who should maintain the calendar after the legal file closes.

Leave with a negotiation list and final checks

Ask for a concise issues list: essential changes, acceptable compromises and questions awaiting evidence. Use it to compare successive drafts. When a change is agreed, confirm that it appears in the final document and all affected schedules.

Before signing, check names, unit boundaries, commencement dates, payment amounts and attached rules. Ask the lawyer to explain notices, default provisions and dispute procedures. Your insurance broker should review insurance wording, while your technical advisers should confirm the feasibility of the intended fit-out.

Licata Law’s commercial-law services include commercial leases. This descriptive reference is not a comparative rating. Ask any prospective lawyer to define the scope and fee for your lease review.

A useful review ends with a document you understand and a practical record of continuing obligations. Keep the executed lease and every amendment together where the person managing the premises can find them.

If a disagreement over an existing lease has already arisen, the commercial-dispute consultation checklist covers the documents and timeline to prepare for that separate discussion.