Unlike residential leases, commercial leases in Ontario have no standard form and virtually no tenant protection legislation. Everything is negotiable — and everything you don't negotiate becomes the landlord's advantage. Here's what every business owner should understand before signing.
Types of Commercial Leases
Gross Lease: You pay a flat monthly rent. The landlord covers property taxes, insurance, and maintenance. Simple, predictable, but usually higher base rent to compensate the landlord for their exposure.
Net Lease (NNN): You pay base rent plus your proportionate share of property taxes, building insurance, and common area maintenance (CAM). These costs can add 20–40% on top of your base rent. Always ask for historical CAM figures before signing.
Percentage Lease: Common in retail malls. You pay a base rent plus a percentage of your gross sales above a certain threshold. Understand the calculation method — "gross sales" definitions vary widely.
Key Clauses to Negotiate
Permitted Use: The lease will specify what your space can be used for. If you plan to expand your offerings, negotiate a broad permitted use clause. A clause that says "coffee shop" instead of "food and beverage" could prevent you from selling retail goods later.
Exclusivity: In multi-tenant buildings, negotiate an exclusivity clause preventing the landlord from leasing to direct competitors in the same building.
Tenant Improvement (TI) Allowance: Most commercial spaces are delivered as a shell. Landlords will often contribute to fit-out costs — drywall, flooring, electrical — in exchange for a longer lease term. The TI allowance is almost always negotiable.
Renewal Options: Lock in your right to renew at a pre-agreed rent or formula. Without a renewal option in writing, the landlord can dramatically increase rent or refuse to renew when your term ends.
Personal Guarantee: Landlords typically require business owners to personally guarantee the lease. Try to limit the guarantee to 6–12 months of rent rather than the full term.
Zoning: Check Before You Fall in Love
Not every space can accommodate every business. Toronto's zoning by-laws determine what activities are permitted in a given location. A restaurant requires specific zoning, ventilation provisions, and potentially a change-of-use permit. A medical clinic has different requirements than a retail store. Your VG commercial agent will confirm zoning compliance before you invest time and money in a space.
Get a Commercial Agent — It's Free to You
In a commercial lease transaction, the tenant's agent is paid by the landlord as part of the leasing commission. There is no cost to you for working with a commercial specialist. Yet many business owners negotiate directly with landlords — leaving significant value on the table. A commercial agent brings market comparables, knows which landlords are flexible, and can identify deal terms you'd never think to ask for.