What You Need To Check Before Signing a Commercial Lease

Finding the right space for a business can be time consuming, but before signing a commercial lease, it is important to understand just how serious that agreement is. A commercial lease is not just a handshake deal, it is a legally binding contract that can affect your finances, flexibility, and long-term success.

In Ontario, commercial lease law falls under the Commercial Tenancies Act (CTA). This legislation sets out the basic rights and responsibilities of both landlords and tenants, covering issues like rent, lease duration, eviction procedures, what happens if either party breaches the contract, as well as dispute resolution and arbitration processes. While the CTA provides the framework, the actual terms of your lease are still largely negotiable and, once you sign, breaching the agreement can come with significant penalties.

That is why commercial leases can be risky if you do not fully understand what you are agreeing to. With a contract this important to your business, a legal review by a skilled lawyer can point out areas of concern and lead you to make the right negotiations. Additionally, since lease disputes can lead to litigation or arbitration, the lawyers at Gionet Fairley Wood LLP assist with reviewing leases for language that may be troublesome if there is a dispute, and to review the dispute resolution provisions. These are some of the things our team at Gionet Fairley Wood LLP watch out for when helping with a review of commercial leases:

Key Terms You Need to Know Before Signing a Commercial Lease

Before signing a commercial lease, it helps to understand the sometimes-confusing terminology of your contract. While it is always best to have your commercial real estate lawyer review your agreement, these are some of the more common terms you should know.

• Incidental expenses, often referred to as MIT (Maintenance, Insurance and Taxes), are extra costs on top of base rent, such as property taxes, insurance, utilities, maintenance, snow removal, or landscaping. These can turn a seemingly affordable space into an expensive one.

• Leasehold improvements are renovations or changes made to the space, so that it suits your business. Unless your lease says otherwise, anything you add—like new flooring, built-in shelving, or machinery—usually stays behind with the landlord when you leave.

• Tenant inducements are perks landlords may offer to attract tenants, like free rent for a few months or a contribution toward renovations. These incentives can be valuable, but only if the terms are clearly written in the lease.

• Dispute Resolution sets out the process that is to be used if there are disputes, or to determine the rental rate for a renewal term. These provisions can include mediation and arbitration, which may be mandatory or optional, and they can also limit the right of appeal following an arbitration. These clauses can significantly impact legal and procedural rights and should be reviewed at the time the lease is negotiated.

These are just a few of the terms you should know so it pays to do your research. A commercial real estate lawyer will be able to walk you through the restrictions and financial consequences that these terms can impose, and litigation lawyers can review a lease with a view to potential disputes, and suitable dispute resolution provisions.

Why You Need an Experienced Local Lawyer on Your Side

Commercial leases are written in complex legal language, and even small clauses can hide big risks. A landlord’s standard lease is usually drafted to protect their interests, not yours, but a real estate lawyer can help level the playing field. They will spot hidden costs, explain how clauses affect your day-to-day operations, and negotiate terms that work in your favour. Legal advice up front can save you from being stuck with unexpected expenses, restrictions on how you run your business, or harsh penalties if you ever need to move out early.

What Should Be Covered in Your Commercial Lease

Beyond those terms, there are other critical issues that should be addressed in your lease:

Zoning and permitted use: Your lease should confirm that the property can legally be used for your type of business. Without this, you could end up unable to operate, even after signing.

Competition concerns: If you are opening a coffee shop, restaurant, or retail store, an “exclusive use” clause can stop the landlord from renting space to a direct competitor next door. Without it, you could find yourself fighting for customers with someone in the same plaza.

Repairs and maintenance: A lease should clearly state who is responsible for major building repairs, HVAC systems, plumbing, or roof issues. Some landlords push these costs onto tenants, which can mean thousands in unexpected bills.

Lease length and flexibility: Most commercial leases lock you in for several years. That is a big commitment, especially for new businesses. It is worth negotiating shorter terms with renewal options, so you are not stuck if the location does not work out.

Exit strategies: Life and business do not always go as planned. Without clear rights to sublease, assign the lease, or terminate early under fair conditions, breaking a lease can be financially devastating.

Each of these issues is negotiable, but only if you understand them and push for terms that protect your interests. This is why it is so important to have a legal advocate by your side who is experienced in commercial real estate law.

Working With Gionet Fairley Wood LLP Can Protect Your Business When Signing a Commercial Lease 

At Gionet Fairley Wood LLP, we focus on litigation, mediation, arbitration and negotiation, which includes commercial lease issues. Our lawyers cooperate with  real estate and commercial lawyers regularly to review provisions of a lease for issues that impact, and hopefully avoid, disputes. 

If a commercial lease issue does proceed to mediation, arbitration, or court, our lawyers are able to assist, ideally with the benefit of having helped craft the dispute resolution processes that need to be followed. We serve clients  across Barrie, Grey County, Muskoka, and Simcoe County, helping business owners understand the fine print, avoid hidden risks, and secure terms that support their growth and success. 

Before you sign a commercial lease, speak with one of our experienced lawyers at Gionet Fairley Wood LLP. Call us at (705) 468 1088 or visit our website to schedule a consultation.

***The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.