As a landlord or tenant involved with commercial space (i.e. office space, industrial space, storefront) for lease in Toronto, the GTA, or Ontario, it is important to have an understanding of the Commercial Tenancies Act. While many of us have personally dealt with the residential side of the act, there are some key differences when dealing with commercial real estate. Here are a few important differences and items to be aware of:
Early Lease Termination
It is extremely important when negotiating a commercial space lease that a clause be included that clearly describes what would occur in the event that a lease would need to be terminated early. This is crucial because businesses are constantly changing and evolving. As the years pass, a tenant may require more or less office space, and it would be unfortunate to find out that there is an obligation to continue paying until the end of the term without any way of exiting. On the other hand, landlords also have the right to protect themselves in these situations by clearly indicating the protocol and available options within their commercials leases.
Commercial tenants typically hold some responsibility when repairs are necessary in their space. The average lease will stipulate that the landlord will take care of large items such as the actual structure of the building or the roof. However, any additional internal repairs are, in many cases, in the hands of the tenant.
Additionally, the tenant will likely have a portion of their rent deemed as “additional rent” to cover costs such as taxes, maintenance, and insurance of the building. This can cause confusion for first-time commercial tenants who get the impression that by paying additional rent, they will not be responsible for internal repairs and maintenance. In reality, they will still need to budget for those costs. A commercial realtor experienced with leasing can provide clarity on what costs to expect and advise of the appropriate clauses to address maintenance and repairs.
Another thing to note about commercial leases is that unlike their residential counterparts, there are no strict rules regarding last month’s rent or security deposits. It’s up to the landlord and tenant to negotiate the deposits prior to entering a lease. Deposits can be based on but, are not limited to such things as type of use, financial status of the tenant, and types of upgrades a landlord may need to have installed within a commercial property. Landlords rely on appropriate deposit amounts to mitigate foreseeable risks associated with taking on a new tenant. It’s important that both sides are protected and have a full understanding of what the deposit is comprised of. The best way to accomplish that is to have clear terms within the commercial lease.
We strongly recommend that commercial tenants and landlords in Toronto, the GTA, and Ontario make themselves familiar with the Commercial Tenancies Act. It addresses the scenarios above in more detail and provides guidelines for a variety of other situations. It can be a significant help to also have a commercial realtor take you through the negotiation process; they’re a great resource when it comes to making sure there is an understanding, and that all of these situations are addressed.
Commercial Space Toronto has access to thousands of commercial properties in Toronto and the GTA, from office spaces to industrial warehouses, and more. Get in touch today to refine your property search.