Commercial leases in Ontario are not like residential leases. There is no standard form. There is no Landlord and Tenant Board to call. And unlike residential tenants, commercial tenants have very limited statutory protections.

What you sign is what you get — for the full term of the lease, which is often five to ten years.

Landlords know this. Their leases are drafted by experienced real estate lawyers, reviewed many times, and refined to shift as much risk as possible onto the tenant. That is not a criticism — it is just how commercial lease negotiations work. The problem is that most tenants sign without reading the lease carefully, or without understanding what they are agreeing to.

Here are five clauses that appear in almost every Ontario commercial lease and that can cause serious problems if you don't understand them before you sign.

1. The Personal Guarantee

This is the clause that surprises tenants most. Many commercial leases require the principal of the tenant corporation to personally guarantee the lease obligations. That means if your corporation defaults — fails to pay rent, vacates early, breaches the lease — the landlord can come after you personally for the entire remaining rent obligation.

If you sign a five-year lease with a monthly rent of $8,000 and you default in year two, you could be personally liable for the remaining three years — $288,000. That liability doesn't disappear when the corporation goes under.

What to negotiate: A cap on the personal guarantee (for example, limited to six months of rent), a burn-down provision so the guarantee decreases over time as you demonstrate reliability, or removal of the personal guarantee entirely if you have a strong negotiating position.

2. The Rent Escalation Formula

Base rent is only part of what you will pay. Most commercial leases include a rent escalation clause that increases rent annually — often tied to CPI (Consumer Price Index), a fixed percentage, or a combination of both.

The problem isn't the concept — it's the compounding. A three percent annual increase on a $10,000/month lease means you're paying $11,593/month by year five. Over a ten-year lease, the difference between a two percent and a four percent escalator can be hundreds of thousands of dollars.

What to negotiate: A cap on annual increases (e.g., no more than two percent per year), or a fixed stepped rent schedule so you know exactly what you will pay each year of the term.

3. Operating Costs and TMI (Taxes, Maintenance, Insurance)

In a gross lease, you pay a fixed rent and the landlord covers operating costs. In a net lease — which is far more common in commercial real estate — you pay base rent plus a proportionate share of the building's operating costs: property taxes, common area maintenance, building insurance, management fees, and more.

The problem is that "operating costs" is often defined very broadly in the lease, and landlords have discretion over how those costs are allocated. Without clear definitions and caps, your total monthly occupancy cost can be significantly higher than your base rent — and it can increase unpredictably year to year.

What to negotiate: A cap on operating cost increases year over year, exclusion of capital expenditures from operating costs, and the right to audit the landlord's operating cost statements.

4. Assignment and Subletting Restrictions

You sign a ten-year lease. Three years in, you want to sell your business. The buyer wants to assume the lease — that is a condition of the deal. But your lease requires the landlord's consent to any assignment, and the landlord has the right to refuse without reason, or to offer to terminate the lease instead.

"Assignment restrictions can make your business unsaleable or significantly reduce its value to a buyer."

This is not hypothetical. Many business sales have fallen apart because of inflexible assignment clauses, or because the landlord used the consent requirement as leverage to extract better terms from the tenant.

What to negotiate: Consent cannot be unreasonably withheld, specific criteria for what constitutes reasonable grounds for refusal, and removal of the landlord's right to terminate the lease in lieu of consenting to an assignment.

5. Renewal Option Terms

Most commercial leases include an option to renew at the end of the term. But the details matter enormously. Many renewal options specify that rent for the renewal period will be set at "market rent" — determined by the landlord, or by arbitration if the parties can't agree.

A renewal at market rent is not a guaranteed renewal at your current rent. In a rising real estate market, your rent could increase dramatically. If the renewal rent is set at a level you can't sustain, you may be forced to vacate — which is exactly what some landlords are hoping for.

What to negotiate: A fixed renewal rent or a capped increase tied to CPI, a defined and binding arbitration process if there is a dispute over market rent, and a meaningful notice period so you have time to make decisions.

Before You Sign

Commercial leases are long, detailed documents written by lawyers for landlords. They are negotiable — but only before you sign. Once your name is on the lease, those terms govern your business for years.

Solvine Law reviews Ontario commercial leases for tenants and landlords, with a flat-fee quote before any work begins. If you are about to sign a commercial lease, book a free call first — it is a small investment that can save you significantly more.