Property & Contract Law
Grigoras Law represents landlords and tenants across Ontario in commercial lease matters, from initial negotiation and drafting through to enforcement and litigation. We act for retail, office, and industrial parties where lease terms, rent obligations, wrongful distress, or termination rights are in dispute. Our work includes practical lease reviews, demand correspondence, urgent applications where possession or re-entry is at stake, and strategic litigation addressing the full scope of each party's rights under the lease and at common law.
What We Do
Pre-execution review of commercial leases and agreements to lease. We identify unfavourable provisions and negotiate improved terms on operating costs, use restrictions, renewal mechanics, and default notice periods.
Read moreAudits and litigation of operating cost reconciliation statements. Disputed capital expenditure charges, management fee overreaching, vacancy gross-up provisions, and enforcement of tenant audit rights.
Read moreLandlord-side enforcement through distress, including bailiff coordination and priority disputes with secured creditors. Tenant-side defence against illegal or irregular distraint and recovery of wrongfully seized goods.
Read moreActing for landlords enforcing rights of re-entry and for tenants applying for relief from forfeiture. Notice validity, waiver analysis, and urgent applications where possession has already been retaken.
Read moreAssignment and sublease transactions, unreasonably withheld consent claims, and recapture provision disputes. Negotiation of releases to sever the original tenant's ongoing personal liability after an assignment.
Read moreClaims for breach of the covenant for quiet enjoyment where construction, access restriction, or landlord conduct substantially impairs the tenant's use. Damages and injunctive relief against derogation from grant.
Read moreEmergency applications for tenants facing unlawful lock-outs and landlords enforcing operating or use covenants. Interlocutory injunctions where ongoing breach requires immediate court intervention to preserve the status quo.
Read moreLandlord and tenant advice in BIA and CCAA proceedings. Distress stays, trustee disclaimer elections, occupation rent claims, and protection of leasehold rights through restructuring and plan of arrangement proceedings.
Read moreYour Legal Team
Counsel — Civil & Commercial Litigation
Counsel — Civil & Commercial Litigation
When Clients Call Us
The landlord is alleging rent arrears and has issued a notice purporting to terminate the lease, with a warning that the premises will be re-entered and the tenant's goods distrained. The tenant disputes the arrears calculation and believes the landlord's notice is defective. We assess the validity of the notice under the lease terms and applicable Ontario legislation, advise on the tenant's right to cure, and — where the threat of lockout is imminent — move urgently for an injunction to restrain unlawful re-entry pending resolution of the underlying dispute.
The tenant has stopped paying base rent and additional rent, and communications have broken down. The landlord wants to recover the arrears and, if necessary, terminate the lease and retake possession for re-leasing. We advise on the landlord's remedy options under the lease and at common law — including distress, termination by acceptance of repudiation, or a court action for arrears — and on the landlord's duty to mitigate its losses by making reasonable efforts to re-let the premises once possession is recovered.
The tenant has entered a conditional agreement to sell its business, with the assignment of the lease as a key closing condition. The landlord is delaying its consent response and has raised objections that the tenant believes go beyond what the lease permits. We review the assignment provisions in the lease, advise on whether the landlord's grounds for refusal constitute an unreasonable withholding of consent, and — if the landlord persists — assess what remedies the tenant has to compel consent or proceed with the transaction over the landlord's objection.
The annual CAM and operating cost reconciliation statement includes charges for capital improvements, management fees, and items excluded by the lease's definition of operating costs. The amounts are significant. We review the lease's additional rent provisions, the landlord's right to recover each category of charge, the audit rights available to the tenant, and the procedural steps required to dispute the reconciliation — including whether any limitation period applies to the tenant's ability to challenge prior years' statements.
The landlord has presented a lengthy standard-form lease weighted heavily in the landlord's favour, and the tenant is not sure which provisions are standard market terms and which represent unusual or unacceptable risk. We review the lease in full, flag the provisions that are most likely to generate disputes — including exclusivity clauses, renewal option mechanics, permitted use restrictions, personal guarantee requirements, and demolition and relocation rights — and advise on what amendments are realistic to negotiate before execution.
Insights & Coverage
Leases & Commercial Contracts
A commercial lease is both a conveyance of an estate in land and a contractual document. It is an agreement under which a landlord grants a tenant the right to occupy and use a defined property for commercial purposes during a specified term, in exchange for rent and the performance of various covenants. Unlike residential tenancies, which are governed by the Residential Tenancies Act, 2006, commercial leases in Ontario are primarily governed by the Commercial Tenancies Act, R.S.O. 1990, c. L.7 (the "CTA"), together with the general principles of contract law and equity. The parties to a commercial lease have significantly greater freedom to structure their relationship than residential landlords and tenants, but that freedom comes with greater complexity and risk on both sides.
The parties to a lease are generally the landlord and the tenant, often referred to in the CTA as the "lessor" and "lessee." The CTA contains broad definitions of each. A "landlord" includes any person who is a lessor, owner, or the person giving or permitting the occupation of the premises, together with their heirs, assigns, and legal representatives. A "tenant" includes a lessee, occupant, sub-tenant, or under-tenant, together with their assigns and legal representatives. These definitions are intentionally wide: a 50% shareholder of a corporate landlord who personally performed the duties of a landlord has been held to fall within the definition, as has a management company and a purchaser under a conditional agreement of purchase and sale.
Ontario's commercial leasing regime proceeds on the assumption that the parties are sophisticated and that contractual freedom governs. Courts will not rewrite a commercial lease to save a party from a bad bargain. For this reason, both landlords and tenants benefit enormously from experienced legal counsel before executing any lease or agreement to lease.
A lease must be distinguished from a licence. A lease is a conveyance of an estate in land — it grants the tenant exclusive possession of the premises for the term. A licence, by contrast, is a mere permission to use a property; it does not convey a leasehold interest in the land, and the licensor can revoke it at will (absent express contractual protections). A licensee becomes a licensee; with a lease, the occupant becomes a tenant with full possessory rights enforceable against the landlord and, in many respects, against the world.
The test applied by the courts to determine whether a particular arrangement is a lease or a licence is whether the agreement, on a proper construction based on the actual intention of the parties, grants exclusive possession of the premises. Exclusive possession does not require the absolute exclusion of the landlord — the landlord may retain rights of access — but it does require that the occupant have the right to use the property as against all others. Licence arrangements, often referred to as "concession agreements," are common in large department stores where licensees operate kiosks or pop-up retail outlets for food, hair services, or other ancillary activities. Because a licensee does not have a possessory interest, the landlord's rights on default are significantly different from those applicable to a tenant.
A landlord and tenant may create a leasehold interest either by executing a formal lease or by entering into an agreement to lease. Both are contractually binding once executed. Despite not having agreed to all the terms, a document in the form of an agreement to lease may itself be held to constitute a lease, and specific performance may be granted where the tenant has entered into possession.
It is common practice in shopping centre leasing to attach the lease in draft form as a schedule to the agreement to lease, giving the tenant an opportunity to review the terms before committing. However, where terms in an agreement to lease differ from those in the formal lease ultimately executed, the latter will generally govern. An "agreement to agree" — a provision that the parties will settle outstanding terms in the future — is no agreement at all and cannot be enforced. Landlords and tenants should ensure that all material terms are agreed upon and recorded before executing any binding document.
Commercial leasing in Ontario is governed by a web of statutes and common law principles. The most important include:
For an agreement to lease or a lease to be binding, it must contain the following essential terms:
The names of the landlord, the tenant, and any guarantor or indemnifier, with sufficient identification.
The location and description of the premises to be leased, identified with sufficient certainty.
The commencement date and expiry date, and any options to renew.
The base rent, and if applicable, additional rent, operating costs, and percentage rent.
The permitted use of the premises and any restrictions on use.
Other conditions, exceptions, or reservations that either party designates as essential to the agreement.
Beyond these essential terms, a standard commercial lease will also address security deposits, fixturing periods, the landlord's and tenant's work, insurance, maintenance, assignments and subleases, parking, and renewal options. Failure to adequately define key terms — such as operating costs — has been held to render an agreement to lease unenforceable for want of essential content.
The Statute of Frauds requires that leases exceeding three years be made by deed. Section 3 of the Act provides an exception for leases of three years or less at a rent not less than two-thirds of the improved value of the property, which may be created orally or informally. For all commercial leases exceeding three years, a written document is not only advisable — it is legally required. An oral lease for a term exceeding three years is void, not merely voidable.
A document which is not made under seal may still take effect as an agreement to lease. The Statute of Frauds must be specifically pleaded as a defence, and its application may be excluded by acts of part performance — for example, where the tenant has entered into possession and paid rent. Courts have also applied estoppel to prevent a party from denying the existence of a lease where the other party has relied on it to their detriment.
Assignments and surrenders of leases are similarly subject to formal requirements. An assignment or surrender of a tenancy that has less than three years to run must also be made by deed to be valid.
Corporations incorporated under the Business Corporations Act, R.S.O. 1990, c. B.16 have the capacity and the rights, powers, and privileges of a natural person and may therefore purchase or lease real estate. The dissolution of a corporate tenant terminates the lease and constitutes the former shareholders in occupation as trespassers, although subsection 241(9) of the Business Corporations Act provides that a dissolved corporation may bring or defend an action within two years of dissolution. The amalgamation of a corporate tenant does not affect the lease, as the amalgamated corporation is treated as a continuation of its predecessor.
Directors and officers may face personal liability for lease obligations in certain circumstances — for example, where the capacity in which the lease was signed is ambiguous, or where the court "lifts the corporate veil" to address fraud or oppression. Directors who participate in a decision to have a corporation breach or abandon its lease may also be sued for inducing breach of contract, provided the landlord proves more than mere direction — deliberate and improper conduct must be shown.
Courts apply ordinary principles of contract interpretation to leases. Ambiguities are resolved so as to give effect to the reasonable expectations of the parties, construed against the background of the factual matrix at the time of contracting. The court will not, however, permit parol evidence to vary a clear and unambiguous lease. If the lease is clear, it will be enforced as written, even if one party later argues the terms are unreasonable.
Courts will not ordinarily imply terms into a lease unless it is necessary to do so to give the lease business efficacy. A lease that inadvertently does not reflect an agreed item — for example, because a landlord silently changed a term from the offer to lease — may be rectified. Rectification is available where both parties had a common intention and the written document does not reflect that intention due to a mistake.
From a practical drafting perspective, leases should be clear, comprehensive, and drafted in language that is readable without excessive legalese. Defined terms should be used consistently throughout. The following provisions frequently become the subject of disputes and deserve particularly careful attention in drafting and negotiation:
For any lease, the parties must describe the leased premises correctly and with sufficient certainty. The name or some other description of the building or shopping centre in which the premises are located, together with the unit number and the street address, is generally sufficient for most commercial purposes. However, where the tenant is leasing a portion of a larger building, the description must be precise enough that the extent of the tenant's exclusive possession can be determined without ambiguity. Disputes about the dimensions of leased premises — and the financial consequences of discrepancies in measurement — are a common source of litigation.
Courts have recognized that, in commercial leasing, an easement for access to the leased premises may be implied where access is necessary for the effective enjoyment of the property and could not have been intended to be withheld. A landlord cannot, by a subsequent act, deprive the tenant of access that was fundamental to the grant.
The common areas of a commercial development — driveways, walkways, parking and delivery areas, lobbies, elevators, corridors, interior mall spaces, and common washrooms — are retained and controlled by the landlord. The tenant does not ordinarily have exclusive possession of these areas but is entitled to their use, together with other tenants, their customers, and visitors. The tenant is generally a licensee with respect to common areas, although an easement may be implied in certain circumstances where access through a common area is essential to the use of the leased premises.
The landlord's right to control common areas is not unlimited. Where a landlord restricts access or permanently interferes with parking and access that was fundamental to the tenant's business, this may constitute a breach of the covenant for quiet enjoyment or a derogation from the landlord's grant. A landlord who, after executing the lease, erects a structure in a designated parking area shown on the plan attached to the lease has been held to be in derogation of its grant.
Most commercial leases grant the landlord the right of entry to inspect the premises, carry out repairs, show the premises to prospective tenants near the end of the term, or carry out the landlord's obligations. This right of access must be exercised in a manner consistent with the tenant's right to possession. The landlord cannot use access rights to harass the tenant or to conduct a de facto eviction. Access for inspection typically requires reasonable notice, except in emergencies.
Leasehold improvements are improvements made by the tenant to the demised premises. At common law, fixtures — items attached to the land — become part of the realty and therefore belong to the landlord upon termination of the lease. The key question is always whether an item has been affixed to the premises and, if so, whether it was intended to become a permanent part of the realty or whether it was attached for the more convenient use of the tenant's business.
Tenant's fixtures — items attached for trade purposes — are generally removable by the tenant before the end of the term. However, a tenant who fails to remove fixtures before the lease expires may lose them to the landlord. Most commercial leases contain express provisions governing the treatment of leasehold improvements at the end of the term, either requiring the tenant to remove them and restore the premises, or permitting the landlord to retain them without compensation.
Fixturing allowances are a common landlord inducement — a cash contribution toward the cost of the tenant's leasehold improvements. The treatment of fixturing allowances for income tax purposes is governed by the provisions of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.).
Commercial leases frequently address environmental obligations. A tenant who causes contamination of the demised premises may face significant liability under provincial environmental legislation, and a landlord who knew of pre-existing contamination and failed to disclose it may be liable for the cost of remediation. Sophisticated leases include detailed environmental indemnification provisions, representations and warranties about the state of the property, and obligations to comply with environmental laws throughout the term.
The intersection of environmental obligations and commercial leasing has become more significant following legislative changes extending liability to directors and officers of tenant corporations for remediation costs arising from the corporation's environmental footprint.
Rent, properly understood, is the consideration paid by the tenant to the landlord for the exclusive possession of the demised premises. The modern conception of rent is a periodical payment, typically monthly, in advance. The reservation of rent in a lease creates an implied covenant to pay it, although most leases also contain an express covenant for certainty.
The labels used in commercial leasing — "gross," "net," "net-net," and "net-net-net" — describe the relative allocation of financial obligations between the parties, but they have no formal legal definition. Their meaning must always be determined by reference to the specific terms of the lease:
| Lease Type | Tenant Pays | Landlord Absorbs |
|---|---|---|
| Gross Lease | Fixed base rent | Realty taxes, utilities, heating/cooling, insurance, maintenance and repair |
| Net Lease | Base rent + realty taxes | Other building operating costs |
| Net-Net Lease | Base rent + taxes + insurance | Maintenance and certain capital items |
| Net-Net-Net (Triple Net) | Base rent + all taxes + insurance + all operating costs | Potentially nothing (though specific exclusions must be negotiated) |
In the absence of agreement to the contrary, the tenant must pay rent for the entire term of the lease without abatement or suspension, unless the landlord's acts amount to an eviction. An eviction requires "something of a grave and permanent character done by the landlord with the intention of depriving the tenant of the enjoyment of the demised premises." A temporary inconvenience or partial interference with possession does not constitute eviction and does not justify suspension of rent.
To maximize the landlord's recovery of expenses, "operating costs" are often extensively defined in commercial leases. All moneys payable by the tenant in addition to basic rent are typically defined as "additional rent" and made expressly subject to the same remedies available to the landlord for non-payment of base rent — including distress and termination.
A typical definition of operating costs includes:
Tenants should negotiate the exclusion of items that are properly the landlord's capital expenditure or investment. Standard exclusions from operating costs include ground rental under any ground lease, debt service costs, leasing commissions, costs recoverable under contractor warranties, and proceeds of insurance claims. Adjustments for vacant premises are also important: many leases provide that if the building is less than fully occupied, the landlord may "gross up" operating costs to what they would have been at full occupancy, preventing tenants from benefiting from the landlord's failure to lease.
If possible, tenants should request audited statements of operating costs, or at minimum statements certified by an officer of the landlord. Most sophisticated leases include tenant audit rights — the right to review the landlord's operating cost records — subject to time limits within which an audit must be demanded following receipt of the annual reconciliation statement.
Many commercial leases, particularly in the retail sector, provide for the tenant to pay "percentage rent" — an amount equal to a set percentage of the tenant's gross receipts above a defined natural breakpoint, being the level of gross receipts at which percentage rent begins to exceed the base rent. The natural breakpoint is derived by dividing the annual base rent by the percentage rate.
"Gross receipts" is typically elaborately defined to prevent manipulation and to ensure the landlord receives the full benefit of the tenant's commercial success at that location. Tenants commonly seek to exclude from the definition of gross receipts: sales taxes, returns and allowances, online sales where goods are not shipped from the leased premises, and certain loss-leader categories. Courts have strictly construed percentage rent clauses, and ambiguities are generally resolved in favour of the narrower interpretation of what must be included.
Rent adjustment mechanisms — including Consumer Price Index escalations, fixed percentage increases, or market rent resets at renewal — are common in longer commercial leases. The renewal rent must be provided for or capable of being fixed with certainty, or the renewal provision will be unenforceable. Courts have held that "current market rate" is sufficiently certain, but a provision that the rent "may be reviewed and adjusted" has been held insufficiently certain to create an enforceable renewal right.
Arbitration clauses for determining renewal rent are common and effective, provided the question to be submitted to the arbitrator is properly defined. An arbitrator's jurisdiction is confined to the matters set out in the submission; awards that proceed on a different basis may be set aside. Arbitration awards are enforceable through the mechanism of the Superior Court of Justice.
To attract desirable tenants, landlords offer a variety of inducements. Common forms include:
Security deposits are typically taken by the landlord as security for the payment of rent and performance of lease obligations. There are two types: deposits applied to the last month's rent, and deposits held as general security throughout the term. The landlord's obligation to repay a security deposit at the end of the term is a personal covenant and does not run with the land — a purchaser of the property from the landlord is not automatically required to repay the deposit to the tenant at the end of the term unless the assignment of the deposit obligation is effected.
A lease must have a fixed commencement date and a fixed expiry date, or a mechanism for determining each with certainty. A lease whose commencement date is uncertain — for example, a lease commencing "when the premises are ready for occupation" without any backstop date — may be held void for uncertainty unless the parties have taken possession and the commencement date can be established by reference to conduct. The rule against uncertainty of term applies to both the start and end dates.
The Planning Act, R.S.O. 1990, c. P.13 contains provisions affecting leases that exceed 21 years in certain circumstances — namely, that a lease for a period in excess of 21 years may constitute a "conveyance" requiring consent under the subdivision control provisions of the Act. Parties to long-term leases should carefully assess Planning Act compliance.
A tenant who holds over after the expiry of a fixed-term lease becomes either a monthly tenant (where the landlord accepts rent on a monthly basis) or a tenant at will. Under the CTA, an overholding tenant on a commercial lease may be removed on at least 60 days' notice if the original term was one year or more, or on shorter notice commensurate with the rental period if the term was shorter. Most commercial leases contain express overholding clauses — typically providing that an overholding tenant becomes a monthly tenant at a substantial premium over the original rent — to discourage holdover occupancy.
A renewal option, if properly exercised, extends the lease on terms agreed in advance or to be determined by a specified mechanism. Strict compliance with renewal notice requirements is generally required. Courts have distinguished between a failure to give notice (which forfeits the option) and a late notice given in good faith where the landlord has suffered no prejudice, but tenants should never rely on equitable intervention. The better practice is strict compliance with all time-sensitive provisions.
A renewal of a lease does not, without more, renew ancillary agreements — including personal guarantees. The covenant of a guarantor does not automatically run with the reversion and is not enforceable by a purchaser from the original landlord absent privity of contract, unless the lease expressly provides otherwise.
Failure to give timely notice of renewal is one of the most common causes of commercial lease disputes. Courts have sometimes granted relief where the tenant's failure was inadvertent and the landlord suffered no prejudice, but relief is not guaranteed. Tenants should maintain a calendar of all option and notice deadlines throughout the entire term of the lease and arrange for advance reminders well before any time-sensitive provisions mature.
A right of first refusal gives the tenant the right to match any bona fide third-party offer for the purchase or lease of specified premises before the landlord may accept that offer. It is triggered by receipt of a bona fide offer and requires the tenant to exercise the right within a specified period. The rule against perpetuities has historically presented challenges for rights of first refusal, but most modern Ontario drafting addresses this expressly.
A purchase option grants the tenant the right to purchase the property at a specified price or on a specified basis, exercisable by notice within the option period. An option to purchase a leasehold estate is an interest in land and is registrable against title. Failure to register may result in the option being cut off by a subsequent purchaser for value without notice.
A covenant is an agreement imposing an obligation on the covenantor. In the context of commercial leasing, certain covenants "run with the land" — meaning that they bind and benefit not only the original parties but also their successors in title. For a covenant to run with the land at law, the following conditions must be satisfied:
A covenant is to be distinguished from a condition, which is a stipulation going to the root of the agreement. The breach of a condition entitles the innocent party to terminate the agreement and claim damages, whereas the breach of a covenant gives rise to a claim in damages but does not automatically entitle the innocent party to terminate — unless the lease contains an express right of re-entry for breach of covenant.
Upon an assignment of the lease, all covenants that run with the land — including restrictive use covenants — bind the assignee. Personal covenants (those that do not touch and concern the land) remain binding only on the original covenantor and do not run with the assignment.
Commercial leases typically allocate repair and maintenance obligations between landlord and tenant. In net leases, the tenant is generally responsible for all repairs and maintenance of the interior of the demised premises, while the landlord maintains the structure, exterior, and common areas. In gross leases, the landlord typically bears broader repair obligations.
A covenant by the tenant to keep premises in "good repair" requires the tenant to put the premises in repair if they are not in repair when the covenant is given. The phrase "reasonable wear and tear excepted" limits the tenant's obligation by excluding deterioration attributable to the ordinary and reasonable use of the premises. However, this exception does not extend to structural disrepair caused by the tenant's neglect.
The Short Forms of Leases Act contains prescribed short form covenants that, when incorporated by reference, have the effect of detailed provisions set out in the legislation. The covenant to repair in the short form is often incorporated into commercial leases and interpreted by courts with reference to the Act.
The use clause defines the purpose for which the tenant may occupy the demised premises. In retail contexts, use clauses serve two related functions: they protect the landlord's ability to maintain the intended mix of tenants in the development, and they protect individual tenants from competition by way of exclusivity covenants.
A clause permitting or requiring the tenant to use the premises only for a specific purpose operates as a restriction on use — but courts have generally declined to treat it as an implied covenant to operate the business. A covenant not to use the premises for a prohibited purpose operates as an ongoing obligation enforceable by injunction or damages. An exclusivity clause — for example, a covenant by the landlord not to permit another tenant in the same development to operate the same type of business — runs with the land as a restrictive covenant enforceable against successors who take with notice.
The Competition Act, R.S.C. 1985, c. C-34 may be relevant where use covenants or exclusivity arrangements unduly restrict competition in a relevant market. Parties should be alive to competition law implications in negotiating radius clauses or co-tenancy restrictions.
In shopping centre leases, the landlord often wants an express covenant by the tenant to continuously operate its business throughout the term. A covenant for continuous operation will not be implied — without an express provision, the tenant has no duty to keep its doors open, even if closure reduces the landlord's percentage rent.
When a major tenant breaches an operating covenant, the effects on a shopping centre can be significant: the landlord loses percentage rent, smaller tenants may have co-tenancy rights that allow them to terminate or reduce their rent, and prospective tenants may decline to sign. Courts have occasionally granted injunctions to enforce operating covenants, but Ontario courts have generally been reluctant to do so — finding that damages are an adequate remedy and that an order to operate is difficult to supervise. The leading case is Islington Village Inc. v. Citibank Canada, [1992] O.J. No. 1970, in which the court declined to issue an injunction compelling a bank to continue operating from leased premises.
A major tenant may negotiate a "going dark" provision — an express right to close and cease operations while continuing to pay rent. Going dark rights typically require advance notice to the landlord and are sometimes coupled with the landlord's right to terminate the lease and recapture the premises if the tenant goes dark for an extended period.
Co-tenancy clauses give tenants the right to terminate the lease or reduce their rent if a specified anchor tenant closes its doors or if occupancy in the development falls below a specified threshold. These provisions are particularly significant in today's retail environment, where the departure of an anchor tenant can dramatically affect foot traffic and the viability of the tenant mix.
The covenant for quiet enjoyment — whether express, implied at common law, or imposed by statute — is one of the most fundamental protections afforded to a commercial tenant. It is a promise by the landlord that the tenant will have peaceful and uninterrupted possession of the demised premises for the duration of the term, free from the acts of the landlord or those claiming under it.
The covenant does not require actual physical interference. Acts short of physical eviction may constitute a breach of the covenant, including:
Acts of a stranger over which the landlord has no control do not constitute a breach of the covenant. However, where the landlord is put on notice of breaches by an adjoining tenant that interfere with the complaining tenant's rights, the landlord must take steps to correct the situation — a failure to act may itself constitute a breach. The landlord may also not derogate from its grant by doing anything on adjacent land that renders the demised premises unfit or materially less fit for the purpose for which they were let.
At common law, a tenant has the right to assign a lease or to sublet without the landlord's consent, unless the lease contains an express restriction. Subsection 23(1) of the CTA modifies this common law rule and requires landlord consent to assign or sublet where the lease contains a covenant against doing so without consent.
An assignment and a sublease are fundamentally different transactions with different legal consequences:
| Feature | Assignment | Sublease |
|---|---|---|
| What is transferred | The entire remaining interest in the lease | A lesser interest — part of the term or part of the premises |
| Privity of estate | Created between landlord and assignee | No privity between head landlord and subtenant |
| Covenants | All covenants running with the land bind the assignee | Only the terms of the sublease bind the subtenant |
| Original tenant's liability | Original tenant remains liable unless specifically released | Original tenant remains liable to the head landlord |
A covenant against assignment is strictly construed against the landlord. Where the lease prohibits assignment without consent, the prohibition extends only to assignments and does not prevent the tenant from granting a sublease, unless the covenant expressly prohibits both. The practical implication is that a tenant who cannot obtain consent to an assignment may be able to structure the transaction as a sublease.
Courts have recognized several forms of a covenant against assignment: (i) a prohibition against assignment without consent, which is the most common; (ii) a prohibition against assignment to any person whatsoever; and (iii) a prohibition against any dealing with the lease. Each is construed strictly, and a landlord who seeks to rely on a forfeiture of the lease for breach of such a covenant must ensure that the prohibition was clearly breached.
Where the lease requires the landlord's consent to an assignment, subsection 23(1) of the CTA provides that such consent is not to be unreasonably withheld. The landlord must have a reasonable basis for withholding consent — personal prejudice or a desire to profit from the tenant's need to assign is not a legitimate ground. Reasonable grounds for withholding consent include legitimate concerns about:
Improper grounds for withholding consent include: a demand for a premium or a higher rent from the assignee; personal dislike of the assignee unrelated to legitimate business concerns; and objecting solely on the basis that the landlord wishes to recapture the premises for its own use. Where the landlord wrongfully withholds consent, the tenant may seek a declaration of unreasonableness and damages for lost business opportunity. In extreme cases, the tenant may be entitled to proceed with the assignment over the landlord's objection.
Many commercial leases contain a "recapture" provision — a right for the landlord to terminate the lease in lieu of consenting to the assignment, recapturing the premises for direct re-letting at current market rates. These provisions must be carefully reviewed by tenants before any assignment is proposed, as the exercise of a recapture right can effectively destroy the economic value of the tenant's assignment.
Unless the lease expressly releases the original tenant, the original tenant remains personally liable on the covenants of the lease throughout the entire term, notwithstanding assignment. Privity of contract — the contractual relationship created by the original lease — survives the assignment. This means that if the assignee defaults, the landlord may sue the original tenant directly for all amounts due under the lease.
Tenants negotiating an assignment should always seek a full release from the landlord as a condition of the assignment. Where a release is refused, the original tenant should seek an indemnity from the assignee — a promise to reimburse the original tenant for any amounts the original tenant is required to pay to the landlord by reason of the assignee's default.
The assignee of a tenant's lease, by accepting the assignment, assumes direct liability to the landlord for all covenants in the lease that run with the land, including the covenant to pay rent. The assignee also takes subject to any defects in the assignor's title to the leasehold interest, including any existing defaults.
Distress is a self-help remedy whereby a landlord seizes and sells the goods and chattels of a tenant to satisfy arrears of rent owing. It is a powerful and immediate remedy, but one that is procedurally complex, heavily regulated, and fraught with potential liability if not executed correctly. The conditions precedent for a valid distress are:
Distress and forfeiture are mutually exclusive remedies. A landlord who has terminated a lease and retaken possession cannot subsequently levy distress for arrears accrued prior to termination. The election between distress and forfeiture is a critical strategic decision that landlords must make carefully — once made, it cannot be undone.
Section 43 of the CTA states that "Distress shall be reasonable." If the landlord wrongfully levies distress, if distress is excessive, or if rent is not in arrears, the tenant may obtain an order for the return of the distrained chattels or may bring an action for damages. Distress is a difficult remedy to carry out correctly, and landlords invariably should engage an experienced, properly licensed bailiff.
Distress is generally limited to the goods and chattels of the tenant physically present on the demised premises at the time of distraint. Not all items on the premises are subject to distress:
Section 48 of the CTA gives the landlord the right, for up to 30 days, to follow and distrain upon chattels that have been fraudulently or clandestinely removed from the premises to avoid distress. A tenant who fraudulently removes goods and anyone who knowingly assists is liable under section 50 for double the value of the chattels removed.
Distress may be effected only during daylight hours — between sunrise and sunset — and not on Sundays. The landlord should retain a properly licensed bailiff to carry out the distraint. The bailiff's warrant must identify: the name of the tenant and any guarantor; the location of the premises; the amount of the arrears; and an indemnification of the landlord. The landlord or bailiff may not break the outer lock to gain entry but, once lawfully on the premises, may break inner locks.
Following seizure, the landlord must give the tenant notice and five days to "replevy" (recover) the distrained goods by paying the arrears and costs. The goods cannot be sold until five clear days after seizure. The best method of sale is typically a public auction. The landlord must account for any surplus after satisfying all rent due and costs of the distress and sale.
A distress is illegal (as opposed to merely irregular) where the fundamental conditions for distress are not met — for example, where no rent is actually in arrears, where the lease has been terminated, or where exempt goods are seized. An illegal distress entitles the tenant to bring an action for full satisfaction of all damages sustained by the wrongful distraint. An irregular distress — one where the right to distrain exists but the procedure was defective — gives rise to a claim only for special damages resulting from the irregularity.
Landlords who instruct a bailiff improperly expose themselves to liability. Where the distress is carried out in good faith on the landlord's instructions, the bailiff is generally entitled to be indemnified by the landlord. Conversely, if the bailiff departs from the landlord's instructions and commits an illegal act of their own, the landlord is not liable.
On non-payment of rent or breach of an express or implied covenant, the landlord has several available remedies. As confirmed by the Supreme Court of Canada in Highway Properties Ltd. v. Kelly, Douglas and Co., [1971] S.C.R. 562, these courses of action are mutually exclusive:
The landlord must make an election between these courses of action. Conduct inconsistent with the elected course — such as accepting rent after purporting to terminate — may constitute a waiver of the termination and revive the tenancy.
To forfeit a lease under subsection 19(2) of the CTA for breach of covenant (other than non-payment of rent, which requires no notice), the landlord must first serve a notice of termination that:
Failure to give a proper notice of termination results in an ineffective forfeiture. The notice must purport to terminate the lease unequivocally and immediately — a notice that terminates at a future date is not a valid notice of forfeiture but rather a notice to quit. Courts will not presume a right of re-entry by the landlord unless the lease clearly implies such a right.
A landlord who, after purporting to terminate the lease, does any act inconsistent with the forfeiture — including accepting rent — is taken to have waived the forfeiture, and the tenancy is treated as continuing. Most leases contain anti-waiver clauses stating that a single acceptance of rent or other act of indulgence does not constitute a waiver of the landlord's right to strictly enforce the lease. Courts have generally given these clauses effect, but they are not absolute — a course of conduct by the landlord over a significant period may still constitute waiver.
Even where a landlord has properly terminated a lease, the tenant may apply for relief from forfeiture. Courts have broad equitable jurisdiction to grant relief, and section 20(1) of the CTA and section 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43 each provide statutory bases for relief. Courts consider the following factors:
For non-payment of rent specifically, additional considerations include: whether there has been an outright refusal by the tenant to pay; the length of time the rent has been in arrears; whether the landlord has suffered serious loss by reason of the delay; and whether the tenant brings the application with clean hands.
The Ontario Court of Appeal set out a comprehensive framework for relief from forfeiture, emphasizing that the judicial exercise involves considerations of hardship, reasonableness, unfairness, and unconscionability, and whether the parties come with clean hands. The court reinforced that relief is generally granted where the breach is capable of remedy and was remedied within a reasonable time, and where no great or irreparable harm has been caused to the landlord.
Section 20(4) of the CTA provides that where an action is brought to enforce a right of re-entry for non-payment of rent, the tenant may stay the action at any time before judgment by paying into court all rent in arrears plus costs. The effect of relief from forfeiture under section 20(5) is to reinstate the lease to its original position. Courts have also granted relief from forfeiture on independent applications by the tenant even after the landlord has regained possession — though delay in bringing such an application is itself a factor weighing against relief.
Where a tenant repudiates the lease by abandoning the premises or refusing to perform, the landlord's damages are assessed on the basis of the present value of the loss of the benefit of the lease for the balance of the term — provided the landlord has elected to terminate and claim damages. The leading Supreme Court authority is Highway Properties, which recognized this as the fourth and most commercially realistic course of action available to a landlord on a tenant's repudiation.
The landlord is under a duty to mitigate its loss by taking reasonable steps to re-let the premises. This duty arises where the landlord elects to terminate and claim damages — it does not arise where the landlord keeps the lease alive and sues for rent as it falls due. Reasonable mitigation requires making genuine efforts to re-let at market rent, not merely listing the premises at an unrealistic price. The landlord need not accept a substituted tenant whose covenant is materially inferior to the defaulting tenant's.
Damages are assessed to put the landlord in the position it would have been in had the tenant performed, subject to the duty to mitigate. In addition to lost rent, the landlord may recover:
Injunctive relief is available in commercial lease disputes to enforce covenants and restrain continuing breaches. A landlord may seek an injunction to enforce a use covenant, a restrictive covenant, or a covenant against unauthorized subletting. A tenant may seek an injunction to restrain unlawful re-entry or threatened forfeiture.
The standard three-part test for an interlocutory injunction requires the applicant to establish: (i) a serious issue to be tried; (ii) irreparable harm if the injunction is refused; and (iii) that the balance of convenience favours the grant of the order. In the commercial lease context, urgency is often a key factor — a landlord who changes the locks without proper notice may face an urgent injunction compelling re-entry by the tenant, and a tenant who faces a threatened wrongful re-entry has a strong basis for urgent relief pending determination of the dispute.
A tenant whose rights are breached by the landlord has several available remedies beyond the right to claim damages:
Tenants should also be aware of the availability of alternative dispute resolution. Many commercial leases contain arbitration provisions for specific disputes (such as renewal rent determinations), and parties may agree at any time to submit a dispute to mediation or arbitration as an alternative to litigation.
When a commercial tenant becomes insolvent and files for bankruptcy or creditor protection, the interaction between insolvency law and commercial leasing creates a complex and often urgent situation for landlords. Under the BIA, upon the making of a receiving order or a voluntary assignment, an automatic stay of proceedings takes effect, preventing the landlord from commencing or continuing any action for recovery of rent or taking any enforcement steps (including distress) against the debtor or its property — except as specifically authorized by the court or the statutory scheme.
Similarly, under the CCAA, an initial order granted by the court stays all proceedings against the debtor company. This stay may explicitly address the landlord's distress rights and rights of termination. A landlord who conducts a distress after the filing of an NOI under the BIA or after the granting of a CCAA initial order may be found in contempt of court.
When a tenant shows signs of financial distress, landlords should immediately: (a) conduct a distress before any insolvency filing if arrears exist and distress is available; (b) review the lease for accelerated rent provisions that may crystallize before a filing; (c) consider whether a demand for payment and notice of termination is warranted; and (d) seek legal advice promptly, because the window for effective enforcement often closes rapidly once an insolvency proceeding commences.
A trustee in bankruptcy may retain, assign, or disclaim the lease. The trustee's decision to retain or disclaim has significant consequences for the landlord:
Where the original tenant has assigned the lease and the assignee subsequently becomes bankrupt, the original tenant's liability as covenantor under the original lease is not extinguished by the bankruptcy. The landlord may, depending on the circumstances, pursue the original tenant directly for the assignee's default.
In CCAA proceedings, the debtor company generally retains control of its operations during the restructuring period, subject to the supervision of the court-appointed Monitor. The initial order typically includes provisions permitting the debtor to carry on business in the ordinary course, which may include continuing to occupy leased premises and making rent payments as they become due in the ordinary course (though not necessarily paying pre-filing arrears without court approval).
The CCAA gives courts broad discretion to make such orders as they consider appropriate in the circumstances, including approvals that may limit or modify the landlord's contractual rights. At the same time, the courts have generally recognized that a landlord's right to be paid current rent and to have its lease obligations honoured is fundamental and should not be lightly overridden.
Section 32 of the CCAA expressly addresses the disclaimer or resilience of contracts in CCAA proceedings, permitting a debtor company — with court approval — to disclaim or resiliate any agreement to which it is a party. A landlord whose lease is disclaimed or resiliated in a CCAA proceeding is entitled to compensation for the loss resulting from the disclaimer, which is treated as a claim provable in the CCAA proceedings. However, the measure of such compensation and its rank in the creditor hierarchy are subject to court determination and the terms of any approved plan of compromise or arrangement.
Common Questions
These terms describe how operating costs are allocated between landlord and tenant, but they carry no fixed legal definition — their meaning in any specific lease depends entirely on the language of the document itself. As a general guide:
The right structure depends on your bargaining position, the nature of the premises, and your ability to budget for variable costs. Tenants in triple-net arrangements should pay particular attention to the operating cost definition, the right to audit, and exclusions for capital items — these provisions can have a significant financial impact over a multi-year term.
Possibly — Ontario courts have broad jurisdiction to grant relief from forfeiture, and many tenants who have faced termination have had their leases reinstated. The remedy is discretionary, and courts weigh several factors in deciding whether to grant it:
Speed matters enormously. Under section 20(4) of the Commercial Tenancies Act, a tenant can stay a court action for possession by paying all arrears and costs into court before judgment. An independent application for relief from forfeiture is also available. Both require prompt action — delay in applying is itself a factor that courts weigh against the tenant.
If the landlord changed the locks without having validly terminated the lease — and without a court order — this is likely an unlawful re-entry. Ontario does not permit "self-help" evictions in commercial tenancies. A landlord who re-enters and excludes the tenant from possession without following the required legal process exposes itself to a claim for damages and, critically, an urgent injunction compelling it to restore possession immediately.
Where the lock change follows a purported termination that was procedurally defective — for example, because no proper notice was served, or because the landlord accepted rent after the alleged default — the tenant has strong grounds to challenge the termination itself and seek both re-entry and relief from forfeiture.
Time is critical. If you have been wrongfully locked out, you should seek legal advice immediately to preserve your ability to obtain injunctive relief. Courts will assess the urgency of the situation, and delay in bringing an application can weigh against the tenant even where the underlying lock-change was unlawful.
It depends on what your lease says. At common law, a tenant may assign or sublet without restriction. However, virtually all commercial leases contain a covenant against assignment or subletting without the landlord's prior written consent. Where such a covenant exists, the Commercial Tenancies Act provides that the landlord's consent may not be unreasonably withheld.
Reasonable grounds for withholding consent include legitimate concerns about the proposed assignee's financial strength, business experience, or intended use of the premises. Unreasonable grounds include a desire to profit from the tenant's need to exit, personal animosity unrelated to the business relationship, or an attempt to recapture below-market space for re-letting at a higher rent.
An assignment and a sublease are legally distinct. An assignment transfers the tenant's entire remaining interest — creating privity of estate between the new tenant and the landlord. A sublease transfers only a portion of the term or the premises, and there is no direct contractual relationship between the head landlord and the subtenant. Importantly, unless the landlord specifically releases you, you remain personally liable on the original lease covenants even after a valid assignment — a risk that is often overlooked and that underscores the importance of negotiating a full release at the time of any assignment.
Operating costs — also referred to as "common area maintenance" or CAM charges — are the landlord's costs of owning, operating, and maintaining the building and common areas, which are passed through to tenants as additional rent. In a typical net commercial lease, they can include insurance, utilities, snow removal, landscaping, security, management fees, and repairs to shared systems. Because they are defined by contract and not by statute, the scope of what your landlord can recover depends entirely on the operating cost definition in your lease.
Common points of dispute include:
If you believe your operating cost statements are inaccurate, act within the time limit specified in your lease for disputing reconciliation statements — missing that deadline can waive your right to challenge the amount.
Distress — the landlord's right to seize and sell a tenant's goods and chattels for arrears of rent — is a powerful remedy, but it is also a heavily regulated one. A number of steps are available to you depending on the circumstances:
You should act before the chattels are sold — once a distress sale occurs, the ability to recover the specific goods is lost and you are left to pursue damages only. Seek legal advice immediately if you believe the distress was unlawful or the procedure was improper.
Insolvency fundamentally changes the legal landscape of a commercial lease relationship. The answer differs depending on whether it is the tenant or the landlord who is insolvent, and which insolvency regime applies.
If the tenant becomes insolvent: A bankruptcy or restructuring filing triggers a statutory stay of proceedings that prevents the landlord from commencing or continuing enforcement steps — including distress and termination — without court authorization. Under the Bankruptcy and Insolvency Act, a trustee in bankruptcy may retain the lease and pay current rent as a priority expense of the estate, or disclaim the lease, in which case the landlord becomes an unsecured creditor for the loss arising from the disclaimer. Under the Companies' Creditors Arrangement Act, the debtor company typically continues to occupy the premises during the restructuring, with the court supervising the treatment of the lease under any plan of arrangement.
If the landlord becomes insolvent: The tenant's lease is generally unaffected by the landlord's insolvency in the short term — the tenant remains entitled to possession under the lease. However, a mortgagee who takes possession or a receiver appointed under a mortgage may have rights that affect the tenant's position, and tenants should seek legal advice promptly to understand how their occupancy rights are protected.
For landlords, the key lesson is to act before an insolvency filing if arrears exist — the window for effective enforcement, including distress, closes quickly once a stay is in place. For tenants, understanding the restructuring process and engaging promptly with the monitor or trustee is essential to protecting the business's right to continue operating from its leased location.
Commercial Leases
Commercial leases are long, complex, and heavily weighted toward the party who drafted them. Whether you are negotiating your first location, facing a default notice, disputing an operating cost reconciliation, or navigating a tenant's insolvency, the decisions you make early determine the outcome. Grigoras Law acts for landlords and tenants across Ontario — from lease review and negotiation through to distress, forfeiture, and commercial lease litigation.
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