Unlike residential real estate leases, there is no standard commercial real estate lease in Ontario. Rather, you will work with a specialized commercial real estate agent to draft a custom lease agreement that aligns with the needs and interests of both parties.
As you might expect, this process can get quite complicated. So, before you sign a lease (either as a tenant or landlord), you’ll want to know what your rights and responsibilities are, and how your interests are protected.
Note: This article will cover the broader elements of commercial real estate leases. For more specific advice, always consult a commercial real estate agent or lawyer.
Are There Commercial Lease Templates?
If you’re preparing to draft or sign a commercial real estate lease, you may have searched online for a template or guideline that you can use. While there are templates out there, it’s far more secure to have a professionally-written lease agreement.
At the end of the day, a commercial real estate lease is a binding legal document, so it’s important to ensure you have all of your bases covered. If you simply download a template agreement from a random website, you could be placing yourself, your business, or your finances at risk.
Instead, it’s better to work with a professional (like a commercial real estate agent or lawyer) who can draft a customized lease agreement based on the circumstances.
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What Should A Commercial Real Estate Lease Include?
Your business (or property) is unique. So, your lease agreement should be too. However, there are a handful of standard details that you can expect to be included. For instance:
- Rental rate
- Deposit amount
- Insurance requirements
- Use of the property
- Repairs, maintenance, and other property-related responsibilities
- Length of tenancy
- Process of lease renewal
These are basic elements that are a part of all commercial real estate leases, but don’t forget that there will be additional agreement clauses, duties, and other add-ons included.
Rules About Commercial Leases
Just because Ontario doesn’t have a standard commercial lease agreement, that doesn’t mean it’s the wild west out there. Similar to residential real estate, Ontario has formal regulations in place regarding commercial leases. These are outlined in the Commercial Tenancies Act (CTA).
The CTA covers a number of basic parameters regarding the rights and obligations of tenants and landlords. That said, it may not cover every last detail in your lease agreement and in some cases, your unique contract may actually override the regulations outlined in it. If this sounds complicated, that’s because it is.
Commercial Rent Increases
Another major difference between residential and commercial real estate leases is rent control. In Ontario, a number of residential properties are impacted by rent control. However, Ontario’s Commercial Tenancies Act does not regulate rent increases. In other words, there’s no formal rent control in place regarding when rent may increase or by how much.
Therefore, it is extremely important to outline the rental rate and the frequency in which it can be changed in your lease agreement. It’s also a good idea to outline a minimum notice period for rent increases. As a business owner, if you leave these details out of your lease agreement, you could face surprise rent increases at a moment’s notice with little recourse.
In need of a new space for your restaurant? Explore these blogs for helpful advice.
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When Disputes Happen
Another unique aspect of the commercial real estate realm is how conflicts are dealt with. On the residential side of things, you’ve got a dedicated system for resolving disputes and disagreements: the Landlord and Tenant Board. Unfortunately, there’s no equivalent for commercial real estate.
When conflicts happen, tenants and landlords need to work together to find a solution. This isn’t always easy and in some cases, things get escalated to Small Claims Court or the Superior Court of Justice.
With all that in mind, the best way to avoid conflict and headaches is by getting it right the first time – i.e. drafting a clear and cohesive lease agreement that represents the interests of all parties involved.
Work With An Expert
If you’re looking to draft or sign a commercial real estate lease as the tenant or the landlord, the best way to protect your interests is by working with an industry-specialized professional.
That’s where we come in – Carve Real Estate. On top of helping you track down the best place to bring your vision to life, we can also guide you through the ins and outs of your lease agreement. Reach out today.
Searching for the right place to bring your business goals to life? We can help! Reach us by email at ryan@carverealestate.com or by phone at 416-618-0054.
