FAQ for Property Owners

Rent stabilization creates predictable income streams while reducing your operating costs. Research from NAI Elliott shows that losing a commercial tenant can cost landlords upwards of $100,000-$200,000 for typical 2,000 square foot retail spaces.  This includes lost rent, marketing expenses, tenant improvements, and legal fees.

Stable tenants who can plan long-term invest more in property improvements, maintain better payment consistency, and create foot traffic that benefits your entire property.

Responsive property management increases tenant satisfaction by 70%, while properties with strong landlord-tenant relationships achieve 70% retention rates for retail/commercial tenants. Properties with stable tenant mixes command higher rents than high-turnover buildings because established businesses attract customers and improve neighborhood appeal.

Thriving small businesses create thriving communities – and the evidence shows this approach to long-term planning benefits landlords through reduced costs and to neighbourhoods through cohesive economic development.

Evidence suggests the opposite. Properties with stable, established businesses typically command higher values than those with frequent turnover. Here’s why:

Stable cash flow attracts investors. Commercial properties with predictable rent rolls and low vacancy rates achieve lower cap rates than comparable properties with tenant instability. Properties with long-term leases and strong, creditworthy tenants have lower cap rates due to predictable income and reduced vacancy risk. Lower cap rates indicate higher property values and greater investor desirability. Institutional investors specifically benefit from stable income streams and premium valuations that established tenant relationships provide.

Toronto’s Ossington Avenue demonstrates what’s possible. Proactive landlords like Hullmark and 100 Group Corp prioritize a functional tenant mix (restaurants, services, retail) that builds neighborhood character over simply offering space to the highest bidders.

The result is low vacancy, high levels of collaboration with the local BIA and retailers – with international brands like Carhartt WIP choosing Ossington over anywhere else in Toronto. On Ossington, landlords and tenants have aligned around building district value to create a situation where businesses, landlords, workers and residents all win – instead of cranking the volume to 11 with large hikes that can cause volatility and lower absorption rates over time.

Strategic development creates long-term value. Mirvish Village in Toronto shows how forward-thinking commercial development works – instead of only building large format retail spaces that can sit vacant for years, they created “25 move-in ready micro retail units” designed for small businesses. Construction completes in 2025 and there is already high demand for the micro-retail spaces from a variety of businesses. The project’s integrated affordable residential rentals, micro-retail, and large scale anchor tenants offer the local community vibrant pedestrian-only high streets that are easily accessible by public transit, cycling lanes, nearby parking, and accessible sidewalks.

Stable business districts generate stronger local economic multiplier effects. Independent businesses recirculate 48-52% of revenue locally compared to just 13-14% for chain stores (Civic Economics, multiple studies, CFIB). When businesses have predictable costs, it becomes easier to reinvest profits into a stronger workforce, local suppliers and community enhancements – rather than extracting profits to distant corporate headquarters. For property owners with multiple holdings in an area, supporting independent businesses creates compounding returns as local spending strengthens the entire district.

The key is predictability, not price controls. Our proposed reforms focus on graduated rent increases, proactive dispute resolution and standard leases – not rent freezes. This creates planning certainty that benefits both tenants and property owners.

Reduced operating costs through lower turnover: According to NAI Elliott  – the average commercial tenant replacement costs $100,000-$200,000 for a typical 2,000 square foot retail space. This includes lost rent during vacancy, marketing expenses, legal fees, and tenant improvement allowances.

Higher rent collection rates: Established businesses with predictable rent increases maintain better on-time payment rates versus new tenants facing uncertain renewal costs. Properties with responsive maintenance and strong tenant relationships see improved rent collection and reduced legal expenses.

Increased property investment: Tenants with lease security invest more in improvements and equipment, creating property value increases that benefit landlords long-term. Your space becomes more valuable when tenants can plan for the future.

Better financing terms: Lenders consider tenant quality and lease stability as key factors in commercial loan underwriting. Properties with established tenant relationships and predictable income streams qualify for better loan terms and approval rates, as the property owner’s ability to borrow against an asset is dependent upon the stability of its tenants.

Successful landlords use predictable increase formulas that provide growth while maintaining tenant stability. The most common approach is fixed annual percentage increases (typically 2-3%) for lease renewals, which ensures your income keeps pace with costs while remaining predictable for tenants.

Consider your total return, not just rent increases. Stable tenants reduce your operating expenses significantly. ToucanToco’s commercial real estate analysis cites a Jones Lang LaSalle 2013 study showing an average cost of $31,927 for losing a commercial tenant when factoring in vacancy loss, marketing costs, leasing commissions, tenant improvements, and administrative expenses.

Here’s a simple example: NAI Elliott’s current research shows that for a 2,000 square foot retail tenant paying $2.50/sq ft/month ($5,000 base rent) plus $2,500 in operating expense reimbursements, the total replacement cost ranges $100,000-$200,000. This breaks down to $90,000 for tenant improvements and incentives, plus $45,000 in lost revenue during a typical 6-month vacancy period.

A 4% annual increase on a retained tenant often generates more profit than a 20% increase that forces costly turnover.

Market data supports gradual increases. Industry research shows that properties using graduated increase formulas achieve higher tenant retention at renewal versus properties with unpredictable increases, as tenants appreciate predictability and transparency in rental rate planning. This consistency creates more valuable, financeable properties.

Build increases into lease agreements upfront. Including clear escalation formulas in initial leases – like “3% annually, maximum 5% in any year” – creates mutual understanding and reduces renewal negotiations. Both parties know what to expect.

Yes, if they have a track record of payment and reasonable recovery prospects. Most financial difficulties are temporary, and replacing tenants costs significantly more than payment plans.

Assess the situation objectively: How long have they been your tenant? What’s their payment history? Is this a temporary cash flow issue or structural business failure? Has their industry been affected by external factors like construction, weather, or economic changes?

Consider these options: Temporary rent reduction for 3-6 months, payment plans for back rent, deferring non-essential improvements, or accepting partial rent while they stabilize. Document everything in writing with clear timelines and expectations.

The numbers often favor accommodation. Using the NAI Elliott example above, if replacing a 2,000 sq ft tenant costs $100,000-$200,000 and you reduce rent by $500/month for 6 months ($3,000 total), you save $97,000-$197,000 while maintaining a known tenant relationship.

Strong tenant partnerships go beyond just rent payments. Look for businesses that demonstrate sustainability, community engagement, and investment in their space. These are the relationships that create long-term value for both parties.

Signs of a thriving partnership: Consistent communication and payment patterns (even if occasionally late), genuine investment in their space and operations, strong customer relationships and foot traffic, positive community presence, and collaborative problem-solving during challenges. These businesses typically weather difficulties and provide stable long-term returns.

When support makes sense: Before considering any changes, calculate what replacement would actually cost: Lost rent during vacancy (typically 3-6 months), marketing expenses ($2,000-5,000), legal fees for new leases ($3,000-7,000), tenant improvement allowances ($20-50/sq ft), and opportunity costs from showing the space. Total replacement costs often exceed 6-12 months of current rent.

When partnerships aren’t working: Some situations signal fundamental mismatches rather than temporary challenges: consistently poor communication despite good business performance, neglect of property maintenance responsibilities, ongoing community complaints, illegal activities, or business models that simply don’t fit the location or market reality.

The goal is building relationships where both landlord and tenant succeed together in creating thriving community spaces.

The full cost of losing a commercial tenant varies significantly by space size and location. ToucanToco’s analysis cites a Jones Lang LaSalle 2013 study showing an average cost of $31,927 across various commercial spaces, while NAI Elliott’s current research shows $100,000-$200,000 for typical 2,000 square foot retail spaces.

Here’s the breakdown for a 2,000 sq ft retail space:

Lost rent during vacancy: 6 months at $7,500/month total revenue = $45,000

Marketing and showing costs: Professional photography, listing fees, broker commissions = $3,000-5,000

Legal and administrative fees: New lease preparation, credit checks, documentation = $2,000-4,000

Tenant improvement allowances: Customization for new tenant = $20-50/sq ft = $40,000-100,000 for 2,000 sq ft space

Free rent incentives: Typically 6-12 months = $30,000-60,000

Additional costs: Utility transfers, cleaning, minor repairs, signage removal = $1,000-2,000

This is why rent stabilization makes financial sense. A 4% annual increase on retained tenants generates more profit than higher increases that force costly turnover cycles.

Commercial properties generally achieve strong returns through combined rent income and property appreciation. According to industry research, commercial real estate typically returns between 6% and 12% annually, with many investors targeting 8-12% ROI for well-managed properties.

Here’s how tenant stability improves returns:

Predictable cash flow: Properties with established, long-term tenants demonstrate more consistent rent collection and reduced vacancy risk. This reliability increases property valuations and improves financing options.

Lower operating expenses: Stable properties require significantly less active management time, reduced legal fees, lower marketing costs, and fewer tenant improvement expenses. These savings directly improve net operating income.

Property appreciation: Commercial buildings with established tenant rosters tend to appreciate more consistently than comparable properties with frequent turnover, as investors pay premiums for predictable income streams.

Financing advantages: Lenders consider tenant quality and lease stability as key factors in commercial loan underwriting. Properties with established tenant relationships and consistent cash flow often qualify for better loan terms and approval rates.

 In Ontario, a landlord’s obligations stem from both contract law and property law—not the Commercial Tenancies Act directly. Here’s how the key right of quiet enjoyment fits into your obligations:

Quiet enjoyment is implied by law: Even if not spelled out in a lease, Section 23 of Ontario’s Conveyancing and Law of Property Act implies the right to quiet enjoyment in every commercial lease – unless the lease clearly removes it.

What it protects: Tenants must be able to use and occupy their premises without substantial interference – like serious disruptions or obstructive construction – rather than occasional noise or brief disturbances.

Other typical legal obligations include maintaining structural elements and common areas (unless specifically delegated to the tenant), complying with safety and accessibility regulations, and respecting specified lease terms related to maintenance, access, or improvements.

Proper documentation – especially of tenant communications, maintenance logs, and compliance certifications – is essential to ensure both parties have understanding in disputes over quiet enjoyment or other issues.

Follow your lease terms and provincial procedures exactly. Commercial eviction timelines are much faster than residential – typically 10-30 days depending on province – but improper procedures can delay collection for months.

Ontario procedures: Serve Notice to Pay Rent (giving tenant time specified in lease, minimum 10 days), then apply for Writ of Possession if unpaid. Tenants can be locked out 16 days after proper notice if rent remains unpaid.

Document everything: Keep records of all notices served, delivery methods used, tenant responses, and payment attempts. Photos of posted notices and certified mail receipts protect you if procedures are challenged.

Consider alternatives before eviction: Payment plans, temporary rent reductions, or assignment to new tenants often recover more money faster than lengthy eviction processes. The goal is rent collection, not necessarily tenant removal.

Get legal advice for complex situations: Use qualified commercial real estate lawyers for disputed evictions, lease interpretations, or situations involving significant amounts. Legal fees for proper procedures cost less than improperly handled evictions.

Commercial landlords need comprehensive coverage protecting against tenant-related risks. Your insurance requirements depend on lease type, property use, and tenant activities.

Essential coverage includes: Commercial general liability ($2-5 million), property insurance covering building and common areas, loss of rent insurance covering tenant default, and umbrella coverage for additional protection.

Tenant insurance requirements: Require tenants to carry general liability insurance ($1-2 million) naming you as additional insured, property insurance for their contents and improvements, and business interruption coverage. Review certificates annually.

Special considerations: In Triple Net leases, tenants may reimburse your building insurance costs, but ensure coverage remains adequate and properly allocated. Some tenants may require higher liability limits based on their business type.

Regular policy reviews: Assess coverage annually as property values change, tenant mix evolves, and liability exposures shift. Work with commercial insurance specialists who understand landlord-tenant relationships.

Treat tenants as business partners, not just rent payers. Successful commercial relationships require ongoing communication, mutual respect, and shared interest in property success.

Establish clear communication channels: Regular check-ins (quarterly or semi-annually), prompt responses to maintenance requests, advance notice of building changes, and accessible contact methods. Tenants appreciate landlords who are available but not intrusive.

Be responsive to reasonable requests: Quick turnaround on maintenance issues, flexibility during temporary business challenges, and consideration of tenant improvement requests. Responsiveness costs little but creates significant tenant loyalty.

Understand their business: Learn what drives your tenants’ success – foot traffic, parking access, signage visibility, operating hours flexibility. Supporting their success ultimately supports your property value.

Maintain professional boundaries: Be friendly but maintain clear business relationships. Document agreements in writing, follow lease terms consistently, and avoid personal guarantees or informal arrangements that complicate professional relationships.

Evaluate business sustainability, not just current finances. Strong tenants have viable business models, adequate capitalization, relevant experience, and realistic expectations about their space needs.

Key evaluation criteria: Business plan quality, industry experience, financial statements showing adequate working capital, personal guarantees or alternative security, and references from previous landlords or business partners.

Red flags to avoid: Undercapitalized startups without industry experience, businesses requiring extensive modifications for basic operations, tenants with unrealistic sales projections, or those unwilling to provide standard financial documentation.

Consider business compatibility: How does their business complement existing tenants? Will they generate foot traffic beneficial to other tenants? Do their operating hours, customer base, and business practices align with your property’s positioning?

Due diligence process: Credit checks, bank references, previous landlord contacts, business license verification, and site visits to current or previous operations. Thorough screening prevents problems later.

Evaluate requests based on mutual benefit and long-term property impact. Reasonable modifications that support tenant success often benefit property owners through increased tenant stability and property value.

Common beneficial modifications: Assignment rights facilitating business sales, co-tenancy clauses protecting against anchor tenant departure, and operating hour flexibility supporting business needs. These modifications reduce tenant risk while maintaining property value.

Modifications requiring careful consideration: Rent reduction requests (evaluate against replacement costs), exclusive use clauses (ensure they don’t restrict future leasing), and expense reallocation (maintain equitable cost distribution).

Documentation requirements: All modifications must be in writing, signed by both parties, and integrated into lease terms. Verbal agreements create confusion and legal complications.

Professional guidance: Use qualified legal counsel for significant modifications affecting rent, term length, or major obligations. Proper documentation prevents future disputes and protects both parties’ interests.

Municipal and provincial governments across Canada are exploring various approaches to commercial rent stability, following successful international models and responding to small business advocacy.

Current policy discussions include: Graduated rent increase caps similar to residential protections, standardized lease terms reducing legal complexity, commercial landlord-tenant tribunals providing affordable dispute resolution, and tenant rights to improvements and assignment.

Provincial variations: Toronto City Council passed motions supporting commercial rent control research by the Ontario government, BC is reviewing commercial tenancy legislation, and federal committees have heard testimony about small business rent challenges.

International precedents: France’s commercial lease protections could provide a model for Canadian implementation, with structured rent indexation and graduated increases rather than unlimited rent hikes.

Timeline expectations: Policy development typically requires 2-3 years from initial proposals to implementation, allowing time for stakeholder consultation, economic impact analysis, and regulatory framework development.

Start implementing best practices now rather than waiting for regulatory requirements. Properties already following fair practices will face zero or minimal disruption from reform implementation.

Immediate steps: Document your current practices, review lease templates for fairness and clarity, establish clear rent increase policies – especially during renewal periods, and maintain positive tenant relationships through responsive service.

Financial preparation: Develop budgets assuming moderate, predictable rent increases rather than large periodic adjustments. This approach can improve tenant retention while maintaining property returns.

Legal readiness: Work with qualified legal counsel to ensure lease terms comply with current law and anticipate potential regulatory changes. Proactive legal compliance costs less than reactive adjustments.

Industry engagement: Participate in landlord associations and policy discussions to influence reform development. Constructive landlord input helps create balanced regulations serving all stakeholders.

Engage constructively in the policy development process rather than opposing all change. Well-designed regulations can benefit property owners by creating more predictable market conditions and reducing costly disputes.

Effective advocacy approaches: Provide specific data about reform impacts, suggest alternative approaches achieving similar goals, participate in government consultations, and work with tenant advocates on mutually beneficial solutions.

Focus on implementation details: Rather than opposing reform concepts entirely, advocate for implementation approaches that consider landlord concerns – graduated timelines, reasonable increase formulas, and balanced dispute resolution procedures.

Build relationships: Develop ongoing relationships with policymakers, tenant advocates, and other industry stakeholders. Consistent engagement allows you to discuss approaches that work for you and your tenants as the conversation evolves.

Professional representation: Consider working through landlord associations and industry groups that can provide coordinated advocacy and professional representation in policy discussions.

Start with qualified legal and real estate professionals who specialize in commercial properties and understand both current law and any potential regulations.

Professional resources: Commercial real estate lawyers, property management specialists, landlord associations (BOMA, local real estate boards), and commercial real estate brokers with landlord-side experience.

Industry organizations: Building Owners and Managers Association (BOMA Canada) provides education, advocacy, and professional development. Local real estate boards offer market data, legal updates, and networking opportunities.

Government resources: Provincial tenancy authorities, municipal planning departments, and commercial licensing offices provide regulatory guidance and compliance information.

Educational opportunities: Commercial real estate courses, landlord-tenant law seminars, and property management certifications help maintain current knowledge and professional standards.

Monitor multiple information sources including government announcements, industry publications, and advocacy organization updates to understand policy trends and implementation timelines.

Government sources: Provincial legislature websites, municipal council agendas, ministerial announcements, and public consultation documents provide official policy information.

Industry publications: Commercial real estate journals, legal newsletters, and property management publications provide analysis and implementation guidance.

Stakeholder organizations: Both landlord associations and tenant advocacy groups (like Better Way Alliance) provide policy updates and analysis from different perspectives.

Professional networks: Legal counsel, property management companies, and real estate professionals often provide client updates about regulatory developments affecting commercial properties.