Commercial Lease Agreement in Ontario: How It Works, the Law and What to Check
What Is a Commercial Lease?
A commercial lease gives a business the right to occupy space, such as an office, a shop, a restaurant, a warehouse or a unit in a plaza, for a stated term in return for rent. The Commercial Tenancies Act does not apply to tenancies that the Residential Tenancies Act, 2006 covers (section 2). If it is unclear which applies, a landlord or tenant can ask the Landlord and Tenant Board for a determination.
The Government of Ontario says there is no standard commercial lease because businesses have different needs, and that a signed lease may take precedence over the Act. It lists the terms a lease should address. See Ontario.ca, renting commercial property.
- The rent, how it can increase and what notice is required.
- The deposit.
- Insurance requirements.
- Repair and maintenance duties.
- How to renew or end the lease.
- The length and type of tenancy, fixed term or month to month.
- Other negotiated terms, such as who pays for renovations.
What the Commercial Tenancies Act Does and Does Not Do
We cover default and ending a lease in more detail in our article on commercial lease termination in Ontario.
Types of Lease: Gross, Net and Triple Net
Rent, Additional Rent and HST
Commercial rent is generally subject to HST. The CRA says a lease of commercial real property is a taxable supply, and that property taxes and other additional rent the tenant pays are generally treated as part of the rent. The Ontario rate is 13%. A small landlord below the CRA’s small supplier threshold does not have to collect it. See CRA, memorandum 19.4.1. Ask whether the rent you are quoted includes HST, and whether the landlord is registered.
From Offer to Lease to Signed Lease
Check that the space works for your business
Read the offer to lease or letter of intent first
Compare the lease to the offer
Review the guarantee, insurance and schedules
Sign, then keep the full set
Personal Guarantees
Many landlords ask the business owners to guarantee the lease personally. A guarantee is a promise to answer for the debt or default of another person. Under the Statute of Frauds, no action can be brought on that kind of promise unless the agreement, or a memorandum or note of it, is in writing and signed by the person to be charged (section 4). A signed guarantee can put your personal assets at risk if the business cannot pay.
- What it covers: rent only, or every obligation under the lease.
- Whether it has a cap, and whether the cap is a dollar amount or a number of months of rent.
- Whether it ends after a set period, or when the lease is assigned.
- Whether it carries over to a renewal or an extension.
- Whether a deposit or a letter of credit could replace it.
Assigning, Subletting and Selling Your Business
The Government of Ontario says tenants can sublet or assign unless the lease prohibits it. When the lease requires the landlord’s consent, section 23 of the Act treats that consent as not to be unreasonably withheld unless the lease expressly says otherwise, and a judge can decide whether it was withheld unreasonably. See Ontario.ca, renting commercial property.
If Something Goes Wrong
The lease and the Act both apply. A fixed-term tenant who ends the lease early generally must pay the rent for the remaining term unless the lease allows ending early, according to the Government of Ontario. Disputes under $50,000 can be brought in Small Claims Court, and applications under the Act go to the Superior Court of Justice. Speak with a lawyer before you stop paying rent, serve a notice or change the locks. See our article on commercial lease termination.
Checklist Before You Sign
Money
Space and use
Risk
Exit
For a closer look at additional rent, repair duties and renewal options, see our article on key clauses in a commercial lease. For a right to buy the property, see our article on right of first refusal vs right of first offer.
For Landlords
How We Help
We review, negotiate and draft commercial leases for tenants and landlords across Ontario, including Toronto, Vaughan and Mississauga, from the offer to lease to the signed lease. See our commercial lease service and our commercial purchase and sale service. Our fees are provided during the consultation. Call (647) 696-8069 or book a free consultation below. We serve clients in English, Hindi and Punjabi.
Frequently Asked Questions
Does the Residential Tenancies Act apply to a commercial lease?
No. The Commercial Tenancies Act does not apply to tenancies that the Residential Tenancies Act, 2006 covers, and commercial tenancies follow the Commercial Tenancies Act and the lease. If it is unclear whether a tenancy is residential or commercial, a landlord or tenant can apply to the Landlord and Tenant Board for a determination.
Is there a standard commercial lease in Ontario?
No. The Government of Ontario says there is no standard commercial lease because businesses have different needs, and that a signed commercial lease may take precedence over the Commercial Tenancies Act. That is why the wording of your lease matters.
Can a commercial landlord raise the rent during the lease?
The Commercial Tenancies Act does not regulate rent increases, so the lease decides. Read the rent schedule, any review clause and how additional rent is calculated before you sign.
Can a commercial landlord evict me?
Your lease and the Act both matter. Unless the lease says otherwise, a landlord may re-enter if rent stays unpaid for 15 days after it was due (section 18). For other breaches, the landlord must first serve a notice that specifies the breach (section 19), and a tenant can ask the Superior Court of Justice for relief (section 20). See our article on commercial lease termination.
What is distress?
Distress is a landlord’s remedy of seizing a tenant’s goods for unpaid rent. The Act says distress must be reasonable, goods exempt from seizure under execution are generally exempt, and seized goods can be sold only after five days’ notice and an appraisal by two appraisers. Speak with a lawyer before a landlord distrains or you respond to a distress.
Can I assign or sublet my commercial lease?
The Government of Ontario says tenants can sublet or assign unless the lease prohibits it. If the lease requires the landlord’s consent, the Act treats that consent as not to be unreasonably withheld unless the lease expressly says otherwise, and a judge can decide whether consent was unreasonably withheld (section 23).
What is the difference between a net lease and a gross lease?
In a gross lease, the tenant pays one rent and the landlord covers the operating costs. In a net lease, the tenant pays base rent plus a share of some or all of the property taxes, building insurance and maintenance. The Act does not define these terms, so your lease lists what is included.
Is HST charged on commercial rent?
Generally yes. The CRA says a lease of commercial real property is a taxable supply, and property taxes and other additional rent the tenant pays are generally treated as part of the rent. The Ontario rate is 13%. A small landlord below the CRA’s small supplier threshold does not have to collect it. Ask whether the rent you are quoted includes HST.
Where are commercial lease disputes heard?
The Government of Ontario says disputes under $50,000 can be brought in Small Claims Court. Applications under the Act, such as relief from forfeiture or an application against a tenant who wrongfully holds over, go to the Superior Court of Justice.
Should a lawyer review an offer to lease before I sign it?
Yes. An offer to lease or letter of intent can set the rent, term, deposit and conditions and may bind you, so have it reviewed before you sign, while the terms can still change.
Related Guides
Legal Information, Not Legal Advice. This guide summarizes the Commercial Tenancies Act and the Statute of Frauds as published on e-Laws (currency date November 3, 2026), the Government of Ontario’s page on renting commercial property (updated July 2, 2026) and CRA memorandum 19.4.1, checked on November 6, 2026. Your lease can change the default rules, and the law changes, so confirm your own situation with a real estate lawyer before you rely on this guide.