The Ontario Ministry of Municipal Affairs and Housing has enacted the Commercial Tenancies Act, an act that outlines specific obligations, rights and the relationship between a commercial landlord and those of his prospective tenants. If you are interested to enter into a commercial lease agreement with a landlord, you have to be familiar with the most basic things included in this act.
It is important to seek legal advice
This is for you to understand what is embodied in the Commercial Tenancies Act and to determine which specific policies apply particularly to your situation. You can use the services of the Law Society of Upper Canada but you can also ask help from other real estate lawyers or professionals.
Read the lease agreement wisely
A signed lease agreement sometimes takes precedence over this act. This agreement enumerates the obligation that the landlord and tenant enter into. Included in these obligations are those pertaining to leasehold improvements, operating and maintenance costs and rent amongst others. This act specifically recommends careful reading of the agreement before the parties sign them.
The landlord is given two options in case you fail to pay your rent
The first option is for the landlord to change the locks of the unit rented. Usually this takes place 16 days after you have failed to pay the rent during the due date stipulated in the contract. For example your rent’s due date is on September 1 but you failed to pay. The landlord will then change the locks on September 17. Remember that you will not be notified by the tenant regarding the changes he has made with the commercial space locks. In any case, though, both landlords and tenants are expected to behave accordingly. Meaning to say, no party should ever force entry into the space’s premises. Landlords should give you ample time and reasonable access to remove your properties inside the rental unit.
The second option of the landlord is to seize and eventually dispose your property. These are the properties that are found inside the rented unit. Like with the first option, you will be given any advance notice regarding the seizing of your property. The good news is you can assert your right to be informed if the lease agreement says so. The landlord is likewise instructed to hold the property for five days before disposing them. This will give you some time to pay for your rent so you can get your property back. If you still fail to pay the rental fee, the landlord has no choice but to have the property appraised then sell it to another person. For this option, the landlord can actually seize the property immediately a day after you have failed to pay your rent.
Proceeds from property disposal will be applied to your rental arrears
Whilst you may lose hope because the tenant has already sold your property to another, you have to remember that any amount in excess of what was applied to your rental arrears will be given to you. This means you get something back in case the value of the property exceeds the amount you owe from your landlord.
Some tenant properties cannot be seized by landlords
This is especially so if you co-own the property you are leasing with another party. Remember though that if you have sub-tenants and they continue to pay the full rent, they will not be held liable for the amount you owe the landlord. In case the landlord has seized sub-tenant property, the former will be required to return it to the sub-tenant.
The commercial tenancy agreement must include specific policies regarding rent increases
Expect that rent increases can come with commercial lease agreements. This, together with the initial rental fee, should be specifically included in your agreement with the tenant. If a current tenancy agreement does not exist, the landlord can increase the rent at any amount deemed necessary at any time. Take note that the Commercial Tenancies Act does not regulate these rent increases. But of course, the landlord is expected to inform you about the intention to increase the rent most preferably in writing.
A notice should be provided for an intend to end tenancy
There are actually two types of tenancy agreements. The first one is the month-to-month tenancy. When you intend to terminate the tenancy with this type of agreement, you should notify the other party about that intention in writing at least a month before the termination date. For example your written notice was delivered on August 31st then the tenancy will be terminated on September 30th. In the second type of tenancy agreement, that which is a fixed-term tenancy, you as a tenant will no longer have the right to occupy the space once the tenancy ends.
Interested to know more about commercial real estate in Toronto? Feel free to contact us. We can help you understand how commercial tenancy works.