FAQ for Business Owners

There are no legal limits on commercial rent increases in any Canadian province or territory. Unlike most residential tenants who have rent increase caps (2.5% annually in Ontario for 2024), commercial tenants face unlimited potential increases.

What this means in practice: Landlords can legally increase rent by 30%, 50%, 100%, or even 300% at lease renewal. For example, in Toronto (2020-2025), retail rents increased approximately 130% (TRREB, 2025) from $18 a square foot on average to $48 a square foot. Without any type of maximum increase baked into your lease contract at renewal, your rent can go up by any amount.

When large commercial rent increases typically happen: lease expiration (most common), rent escalation clauses during the lease term, or when moving from month-to-month to new lease terms. Some landlords will use lease renewal periods as an opportunity to increase rates by enormous amounts to evict existing tenants and offer the space at higher rents – or lower rents to a different tenant.

While there’s no legal definition of “reasonable,” typical increases vary by situation:

• During lease term: 2-5% annually (if escalation clauses exist)
• Lease renewals in major centers: 15-35% increases are common
• Displacement-level increases: 50-300% often used to force tenant changes
• Regional variations: Toronto/GTA (20-35%), Ottawa (10-20%), smaller cities (5-25%)

Many successful landlords use inflation-plus formulas (CPI + 1-2%) to maintain tenant stability while ensuring growth. We believe that a reasonable commercial rent increase is in line with inflation. If you are facing an extreme increase, research comparable rents in your area and present data to your landlord showing local rates – along with the value you’ve created via foot traffic, increased local commerce, and improvements to their space.

Yes, this is completely legal and unfortunately common. Landlords might increase your renewal rent by 50%, then advertise the space for 20% less after you leave. This practice is used to change tenant mix, test price increases, or abruptly end a relationship with current tenants.

Your limited options include negotiating during your lease term to lock in reasonable renewal terms, documenting comparable rents to challenge unreasonable increases, and having direct conversations with your landlord about their plans.

Provinces and territories with Commercial Tenancy Acts include Ontario, British Columbia, Saskatchewan (commercial provisions within Landlord and Tenant Act), Yukon (Commercial Landlord and Tenant Act), Prince Edward Island, Newfoundland and Labrador, and Nunavut, each with different eviction timelines (10-30 days) and procedures.

Other provinces and territories (Alberta, Manitoba, Nova Scotia, New Brunswick, Northwest Territories) are governed by common law contract principles with fewer statutory protections.

What you DON’T have: rent increase limits, standard lease requirements, affordable dispute resolution (court only), or the ability to withhold rent when landlords owe you money. Everything in commercial leases is negotiable before signing, but once signed, you’re bound by those specific terms.

This is why we’re continuing to advocate for Canada’s small businesses. Lease renewals are one of the most stressful parts of running any business – but we can change that. Read more about our work to create new rights for commercial tenants.

It is highly recommended to hire a lawyer for commercial lease renewals – especially for leases over $5,000/month or 3+ years in length. Commercial leases are complex contracts where everything is negotiable and can be dozens of pages (in small print!) long. Small changes in language can have huge financial implications.

A lawyer typically costs $4,000-10,000 for lease review but often saves far more through better terms – or simply telling you to walk away.

For smaller leases, at minimum get the free 30-minute consultation through your provincial Law Society Referral Service. Look for lawyers specializing in commercial real estate who understand small business needs and offer flat-fee arrangements rather than just hourly billing.

Fixed-term leases specify exact start and end dates (e.g., 3 years). You’re committed to paying rent for the entire term even if you leave early, unless your lease includes early termination clauses. No notice is needed to end the lease – it simply expires on the specified date.

Month-to-month leases continue indefinitely until either party gives written notice (usually one month minimum). While more flexible, landlords can increase rent each month or terminate the tenancy with proper notice, making budgeting and long-term planning much more difficult.

Important warning: When your fixed-term lease expires, your landlord has NO obligation to offer a new fixed-term lease. They can choose to put you on month-to-month terms instead, which gives them the power to increase rent or terminate your tenancy with short notice. This is sometimes used as a strategy to pressure tenants into accepting unfavorable renewal terms or to facilitate their exit. Always negotiate renewal options during your initial lease to avoid being forced into month-to-month situations.

There are four main lease types you’ll encounter in Canada. Understanding these helps you budget accurately and avoid surprises:

Gross Lease: You pay one monthly amount; the landlord covers all expenses (taxes, insurance, maintenance). Best for new businesses wanting predictable costs. Base rent can be higher than other lease types since the landlord absorbs all operating risk and expense fluctuations.

Triple Net (NNN): You pay base rent plus property taxes, insurance, AND maintenance. Lowest base rent but highest risk – avoid if you’re inexperienced or single-location. Best for franchise businesses comfortable managing property and repair costs.  Read why NNN leases should be avoided in our blog.

Modified Gross: You pay base rent plus specific agreed expenses; the landlord covers the rest. Good balance of predictability and cost control. Common arrangements include tenant paying utilities and janitorial while the landlord covers taxes, insurance, and major maintenance.

Percentage Lease: Base rent plus 3-8% of gross sales, common in shopping centers and high-traffic retail. Best for experienced retail businesses with strong sales potential. Most percentage leases include a sales threshold – you only pay the percentage on sales above a certain amount (like $500,000 annually). These leases are becoming more common for restaurants and hospitality businesses in urban areas where renovation costs may run into the millions.

Chi Real Estate Group has a stellar blog post about leases for restaurants and hospitality based businesses which explains the pros and cons of Percentage Leases.

This is arguably the most important decision you’ll make for your business. Commercial leases typically run 3-10 years and everything is negotiable before signing – but nothing is negotiable once you’ve signed. Poor lease terms can destroy an otherwise successful business, while good terms provide stability and growth opportunities.

Do your homework first. Research your landlord’s reputation by talking to other tenants in the building. Are they responsive to maintenance requests? Do they spring surprise charges? How did they handle COVID-19 rent issues? Also research comparable rents (realtor.ca has a comprehensive search filter) in your area – knowledge is power in negotiations.

Critical Financial Terms to Negotiate:

• Rent increase caps: “Annual increases limited to CPI + 2%, maximum 4% per year”
• Security deposit alternatives: Negotiate lower amounts, letters of credit, or interest payments
• Personal guarantee limitations: Cap amount, include sunset clauses after 24 months of on-time payments, limit to rent only (not all lease violations)
• Tenant improvement allowances: Landlord-provided money ($20-50/sq ft is common for longer leases) to help cover build-out costs like flooring, lighting, and basic renovations to make the space suitable for your business.
• CAM charge caps: Maximum annual increases of 5% and exclusions for major capital projects
• Percentage rent thresholds: If applicable, negotiate higher sales thresholds before percentage kicks in

Essential Operational Protections:

• Permitted use clauses: Make them broad – “retail sales and related services” vs. “women’s clothing only”
• Assignment/subletting rights: Include approval processes, timing, and acceptable business types
• Renewal options: Lock in pricing mechanisms like “market rate or CPI + 3%, whichever is lower”
• Early termination rights: Include triggers like sales below certain thresholds, health issues, or force majeure
• Exclusive use clauses: Prevent landlord from leasing to direct competitors (especially valuable if you compete with chain stores)
• Signage and operating hours: Ensure flexibility for your business model

Maintenance and responsibility terms vary dramatically by lease type. In Gross leases, clarify what landlord covers. In Net leases, understand exactly what you’re responsible for – some tenants get stuck with roof replacements costing $50,000+. Negotiate caps on major capital expenditures and require landlord approval for expenses over $5,000. If you’re signing a NNN lease, absolutely hire a building inspector to review the space before signing.

Red flags that should make you walk away: Clauses allowing rent increases “at landlord’s discretion,” requirements to pay for landlord’s legal fees, automatic renewal clauses, or leases that make you responsible for structural repairs. If the landlord won’t negotiate on basic fairness issues, find another space.

Critical lease language to include: “Tenant may remove all trade fixtures, equipment, and personal property at lease termination, provided premises are restored to original condition, excluding normal wear and tear.”

Negotiation process matters. Take time – most lease negotiations should take 30-60 days. Don’t let landlords pressure you with artificial deadlines – literally every single landlord will say “I’ve got interest from another party or two” to get you to make a quick decision where you may miss critical information.

Consider hiring a commercial real estate lawyer for leases over $5,000/month or a broker who can negotiate on your behalf. Remember: landlords want to fill empty space, so you have more leverage than you think, especially in markets with high vacancy rates.

A personal guarantee makes you personally liable for lease obligations beyond your business assets. If your business can’t pay rent, the landlord can pursue your personal assets (home, savings, etc.). This is extremely common in commercial leases, especially for new businesses.

Negotiate limitations where possible: cap the guarantee amount, include sunset clauses after establishing payment history, or limit it to specific obligations like rent (not all lease violations). For established businesses with strong credit, you may be able to avoid personal guarantees entirely.

This depends entirely on your lease terms. Assignment transfers your entire lease to another party (you’re out completely), while subleasing means you remain responsible but another business operates in the space. Many leases require landlord approval for either option.

Negotiate these rights upfront – they’re valuable exit strategies if your business outgrows the space or faces difficulties. Include specific procedures for approval, acceptable business types, and timeframes. Without these clauses, you may be stuck paying rent even if you need to relocate.

You’re generally liable for rent for the full lease term unless your lease includes early termination clauses. Some options include finding a replacement tenant (assignment), negotiating a buyout with your landlord, or proving landlord breach of contract.

Plan ahead: Negotiate early termination clauses during initial lease discussions. Common triggers include business failure, health issues, or force majeure events. Early termination clauses typically require 6-12 months notice and may include penalty payments, but they’re cheaper than paying rent for years on unused space.

CAM charges cover shared building expenses like lobbies, parking lots, landscaping, security, and exterior maintenance. In multi-tenant buildings, these costs are typically split based on your percentage of total building space.

Watch for: Vague CAM definitions that allow unlimited charges, lack of annual caps, and inclusion of capital improvements that should be landlord expenses. Negotiate for annual CAM statements showing actual expenses, caps on increases, and exclusions for major capital projects. Budget 5-15% of base rent for CAM charges (BOMA Canada, 2024) in most markets.

Many businesses keep total occupancy costs (rent + taxes + insurance + CAM) at 10-15% of gross revenue. Retail businesses might go slightly higher (15-20%) if location drives significant foot traffic, while service businesses should target the lower end.

Calculate total occupancy costs including base rent, property taxes (in net leases), insurance, CAM charges, and utilities. Don’t just look at base rent – Triple Net leases can add 30-50% to your total costs. Factor in annual increases when projecting multi-year budgets.

Start with base rent then add all additional costs.

Sample breakdown for 1,000 sq ft retail space:

• Gross lease at $25/sq ft = $25,000/year total
• Triple Net at $15/sq ft base + $8/sq ft (taxes/insurance/maintenance) = $23,000/year
• Modified Gross at $20/sq ft + utilities/cleaning = $22,000-24,000/year

Watch out for special assessments and year-end overages. Many business owners receive surprise bills for $10,000-20,000 at year-end for CAM charges, property tax increases, or special building projects that weren’t properly budgeted by property management. This often indicates poor financial management by the landlord. Before signing, research your landlord’s reputation with existing tenants (seriously, picking up the phone can save your hundreds of thousands of dollars) and ask for detailed CAM reconciliation statements from previous years to understand their budgeting practices.

Don’t forget one-time costs: Security deposit (1-3 months rent), tenant improvements ($20-100/sq ft), legal review ($2,000-5,000), moving costs, and business setup expenses. These upfront costs often equal 6-12 months of rent.

Commercial deposits are typically returned 30-60 days after lease ends (longer than residential’s 10 days). Unlike residential tenants, landlords are NOT required to pay interest on commercial deposits in Ontario and most provinces.

Protect your deposit: Document existing damage with photos at move-in, get written agreement on what constitutes “normal wear,” maintain the space properly throughout tenancy, and provide written notice of your forwarding address when leaving. Deposits can be used for unpaid rent, damage beyond normal wear, or restoration costs if specified in your lease.

Typical requirements include: General liability ($1-2 million for customer injuries), property insurance (your equipment/inventory), business interruption (lost income coverage), and tenant’s legal liability (damage you cause to landlord’s property).

Additional coverage often required: Umbrella policy ($1-5 million extra liability), workers’ compensation (if you have employees), professional liability (service businesses), and cyber liability (if handling customer data). Your Landlord must be named as “additional insured” on your liability policy. Budget 1-3% of annual revenue for commercial insurance.

In Triple Net leases, you may also pay for landlord’s building insurance. This is, sadly, common – NNN tenants typically reimburse landlords for property insurance covering the building structure and common area liability.

However, watch for inappropriate charges like landlord’s personal liability coverage, property management company employee benefits (seriously, we’ve seen it!), insurance on other properties, or inflated premiums. Request annual insurance certificates and compare costs to market rates. Some landlords inflate these charges as hidden profit centers, so negotiate caps on insurance increases and require competitive bidding for policies over certain amounts.

It depends on your lease type. Gross leases: Landlord pays (included in rent). Net leases: You pay directly or reimburse the landlord monthly/quarterly, typically allocated by your percentage of building space.

In Net leases, budget 10-15% of base rent for property taxes in most Ontario markets. Ensure you receive annual property tax assessments from your landlord to verify correct amounts. Taxes can increase significantly with property improvements or municipal reassessments.

Check your lease first – maintenance responsibilities vary dramatically between lease types. In Gross leases, landlords typically handle major maintenance; in Triple Net leases, you might be responsible for almost everything – including roof repairs, HVAC, plumbing, even building foundation repairs.

If it’s landlord’s responsibility: Document the problem with photos, send written notice referencing specific lease clauses and requesting action within reasonable timeframes, keep copies of all communications. If landlord doesn’t respond, you may need legal action through Small Claims Court (under $35,000) (Ontario Courts) or Superior Court for larger issues.

Yes, unless you negotiate otherwise. Unlike residential tenancies with statutory protections, commercial leases operate under “freedom of contract” principles – meaning both parties can negotiate any terms that aren’t illegal. Landlords often include default restrictions on operating hours (especially in mixed-use buildings and indoor/outdoor malls), signage size/style/location, noise levels, and types of business activities. Shopping centers typically require minimum operating hours to maintain foot traffic.

You have the right to negotiate these restrictions before signing. Don’t accept restrictive clauses just because they’re in the landlord’s standard lease – everything is negotiable in commercial contracts. Ensure permitted use clauses are broad enough for your business model and planned expansions. Negotiate specific signage rights including size, lighting, location, and streamlined approval processes for changes. Remember: what’s not explicitly permitted in your lease may be prohibited, so negotiate proactively for the operational freedoms your business needs.

Normal wear and tear includes minor scuffs on walls, worn carpeting from regular foot traffic, faded paint from sunlight, and minor nail holes from business operations. Tenant damage includes holes in walls, stained/burned carpeting, broken fixtures, and damage from modifications without approval.

Protect yourself: Document existing conditions with photos at move-in, get written agreement on restoration requirements, maintain reasonable cleanliness throughout tenancy, and plan for restoration costs in your move-out budget. Commercial leases often require returning space to “original condition.”

This varies by lease type and specific agreement. Gross leases typically include utilities in rent, while Net leases usually make tenants responsible for utilities serving their space. In multi-tenant buildings, utilities might be shared and allocated by square footage.

Clarify upfront: Which utilities are included, how shared utilities are calculated, whether separate meters exist, and who handles setup/disconnection. Budget $2-6/sq ft annually for utilities in most commercial spaces, depending on business type and local rates.

Most leases require landlord approval for improvements beyond minor cosmetic changes. Consider who pays for improvements, who owns them during and after the lease, whether you must remove them when leaving, and if they affect your rent or property taxes.

It is advised to negotiate shared costs for major improvements. Remember that any leasehold improvements typically become the landlord’s property at lease end – they get permanent value while you bear the full cost. For substantial renovations (new flooring, lighting, HVAC upgrades, structural changes), negotiate cost-sharing arrangements since the landlord benefits long-term from increased property value. A fair approach might be splitting costs based on the remaining lease term – if you have 5 years left on a 10-year improvement lifespan, you pay 50% and your landlord pays 50%.

Get everything in writing: Approval processes, ownership of improvements, restoration requirements at lease end, cost-sharing agreements, and any rent adjustments. Some landlords provide “tenant improvement allowances” to help with build-out costs, especially for longer leases.

Start early – begin discussions 12-18 months before expiration. Research comparable rents for similar spaces, document your payment history and space investments, and highlight your value as an established tenant (customer base, foot traffic, etc.).

Key preparation strategies:

• Highlight your value and cost savings to landlord: Improvements made, customer base, foot traffic, plus landlord savings (no vacancy period, tenant improvement costs, or marketing expenses)
• Calculate total cost of staying vs. moving (moving costs, lost business during transition, new build-out expenses)
• Plan B: Start looking at alternative spaces 18+ months out if you suspect your landlord may drop a displacement level rent increase on your business
• Document everything: Keep records of improvements, maintenance handled, and any landlord responsiveness problems
• Track market rates in your neighbourhood annually, not just at renewal time

Remember: Landlords have NO obligation to renew commercial leases. Consider renewal options in your original lease, prepare for potential relocation by understanding market rates and availability, and maintain good relationships with your landlord throughout the lease term.

Act immediately – don’t wait until you’re behind. Contact your landlord in writing to explain your situation and propose a payment plan. In most Canadian provinces, landlords can start eviction proceedings after just 16 days of non-payment. Most landlords will understand that many businesses go through tight cash-flow periods. And MOST will want to keep you around – so be proactive!

Document all communications and consider getting legal advice quickly. If you’re facing temporary hardship, some landlords will work with established tenants rather than deal with vacancy costs.

If you can’t reach an agreement, prioritize getting legal help through the Law Society Referral Service (Ontario: 1-900-565-4577) for a free 30-minute consultation. Don’t ignore the problem – early action gives you more options.

Unfortunately, you cannot legally withhold rent even if your landlord owes you money – unless you’ve baked a clause into your rent agreement. This commonly happens when you pay for repairs (like an HVAC system that needs to be fixed TODAY) that were the landlord’s responsibility, or when there are property tax overpayments. Unlike residential tenants, commercial tenants have no offset rights.

Your options are limited: continue paying rent while pursuing separate legal action, negotiate directly with the landlord for reimbursement, or seek mediation. Document everything with receipts and communications.

The BWA continues to advocate for changing this unfair system and allow tenant-landlord offsets similar to residential protections so your cash-flow stays protected while ensuring landlords live up to the agreement they’ve signed.

It depends on what’s in your lease. Commercial leases in Canada are governed primarily by contract law, not residential tenancy law—so the rules around landlord entry vary based on what you’ve agreed to in writing.

Most commercial leases include a “right of entry” clause outlining when and why a landlord can access the space. In many cases, they’re allowed to enter for inspections, repairs, or showing the unit to prospective tenants or buyers—but the lease may or may not require advance notice. Unless your lease specifically says otherwise, landlords are not always legally required to give 24–48 hours’ notice like they would in residential tenancies.

That said, emergency access is always allowed—landlords can enter without notice in cases like fires, flooding, or other urgent threats to people or property.

Quiet enjoyment still matters.

Even if your lease gives broad access rights to the landlord, they still must respect your right to “quiet enjoyment”—meaning they can’t harass, disrupt, or interfere with your business operations without good reason. Repeated, unnecessary entry without proper cause could violate that right, and you may have legal recourse depending on the circumstances.

What you can do if it becomes a problem:

• Check your lease. Look for a section about landlord access or inspections.

• Document everything. Keep a record of unexpected visits—date, time, reason, and any impact on your business.

• Send a written notice. Politely reference your lease terms and ask for notice moving forward.

• Get legal advice if the issue continues—especially if you’re considering early termination or claiming breach of quiet enjoyment.

For immediate crises (illegal lockouts, eviction notices, safety hazards):

• Call a lawyer immediately: Law Society Referral Service for free 30-minute consultation – Ontario (1-900-565-4577), BC (1-800-663-1919), Alberta (1-800-642-3810)
• Document everything: Take photos, save all communications, gather lease documents
• Emergency court applications: For illegal lockouts, you may get back into your space within 24-48 hours

Eviction notice timelines: In Ontario, landlords can change locks 16 days after non-payment notice. Don’t wait – act within days, not weeks. Read the notice carefully, confirm if it’s valid under your lease terms, and respond in writing if it contains errors.

Start with free consultations: Provincial Law Society Referral Services provide 30-minute free consultations and can connect you with commercial real estate specialists who understand small business needs.

Typical legal costs: Lease review ($2,500-7,000), dispute resolution ($5,000-25,000+), simple legal letters ($500-1,500). Look for lawyers offering flat-fee arrangements rather than hourly billing, payment plans, and limited scope representation for specific issues.

When you need a lawyer: Any lease over $5,000/month, disputes over $10,000, eviction proceedings, or complex lease negotiations. Legal Aid has very limited availability for commercial issues.