FAQ: Frequently Asked Questions
about landlord litigation in Canada
A commercial lease is a contract made between a landlord and a business tenant. The lease gives a tenant the right to use a property for a commercial activity for a period of time in exchange for something of value (usually money) given in exchange to the landlord. The lease contract will outline the rights and responsibilities of both the landlord and tenant during the lease term.
No. Each province has its own laws related to commercial leases. There are different rules that landlords and tenants must follow in each province. In Ontario, the Commercial Tenancies Act and common law (judge-made law) apply. Contact us to learn more about landlord rights.
Commercial leases are governed by different rules that result in less government intervention in comparison to residential leases. There is an assumption of a power imbalance in favour of a landlord in residential leases that is generally viewed as requiring government intervention. Commercial leases are treated differently because there is an assumption that the parties to a commercial lease are knowledgeable businesspeople who have greater bargaining power and are therefore free to negotiate lease terms.
A contract can be made orally for leases that are for a term of less than one year in Ontario, but this is not recommended as disputes are likely to arise on the terms of an oral lease that can make the lease difficult to enforce. Ontario law does not allow oral contracts for lease terms that are for one year or more.
Base rent is the minimum rent that is agreed to be paid in the lease contract. Base rent does not include percentage rents or any other additional or operating costs that may be added to the base rent.
T.M.I. stands for Taxes, Maintenance and Insurance. In commercial leases, the contract typically requires a tenant to pay T.M.I in addition to base rent.
A percentage lease refers to a specific type of rental arrangement that applies mainly to retailers, especially in shopping centers or multiple-tenant malls. With a percentage lease, the tenant pays a fixed or base rent plus a percentage of gross income. To create this type of rental arrangement, have the tenant pay "Base Rent plus % of Gross Profits".
A Gross rent lease is a type of commercial lease where the tenant pays a fixed rent (sometimes the tenant will be required to pay a fixed base rent plus certain specified expenses with respect to the Premises) and the landlord pays all other expenses associated with operating and maintaining the property. Operating expenses may include insurance, utilities, maintenance expenses and sometimes taxes.
Triple-net leases are the most common form of commercial lease. They can be used for retail, warehouse and industrial properties. The tenant is responsible for all of the costs of operating the building (including repairs and maintenance) in a triple-net lease.
A commercial landlord may commence legal proceedings to collect unpaid rent. Other remedies may include distraint or eviction. If the lease was guaranteed by others, then the landlord may look to the guarantors to collect the unpaid rent.
Distraint is the act of seizing a tenant’s property to pay for rental arrears.
Arbitration is a dispute resolution process that involves an arbitration instead of a judge. Arbitrations are private and typically confidential. Arbitration can provide more flexible procedures than court proceedings and arbitration can be concluded faster and more efficiently. Arbitration is binding on the parties.
Mediation is a process for settling disputes that involves the assistance of a third party – a mediator. Mediation is private and confidential. Mediated settlements are non-binding unless the parties agree otherwise.
Yes. A dispute can be arbitrated if the lease contract allows for arbitration as a dispute resolution process. Otherwise, the parties can agree to have their disputes settled through arbitration. We strongly encourage the use of arbitration where appropriate to do so.
Yes. We strongly encourage parties to attempt settlement where appropriate. Mediation is a great way to guide parties to a resolution.
The lease contract will typically indicate who is responsible for repairs and maintenance and that responsibility is typically divided depending on the type of work to be done. Commercial lease disputes can arise over who is responsible for covering the costs of certain repairs or whether promised services were delivered.
Yes. A tenant can take action to enforce the terms of the lease and subtenancy agreement against a subtenant.
A forbearance agreement is an agreement between parties to refrain from doing something that one or both parties are legally entitled to do. In the tenancy context, it usually involves a landlord temporarily refraining from taking action against a tenant.