Commercial Rent FAQ: What Are my Rights as Commercial Tenant in Canada?
How much can my commercial rent go up in Canada's Provinces like Ontario, BC, New Brunswick, etc?
Whether or not you have a lease with your landlord, at the end of the term (or month) there is no limit to potential rent increases from term to term. We commonly hear of 30, 50, even 300% rent increases from one lease to the next.
While it is possible to negotiate rent caps into your lease, it is fairly rare that a landlord would accept such a clause. Huge rent increases are increasingly common. Between Q3 2022-2023, the average price of commercial rent went up almost 33% in the GTA.
If you think this is unfair, send a message to your MPP/MLA & MP that you want basic protections for commercial renters. Sign the Commercial Renter Bill of Rights here.
Are there any dispute resolution tools aside from suing my landlord in Ontario?
Your only way to resolve a commercial landlord dispute in Ontario and any Canadian province is taking them to court. Whether it’s a leaky sewage pipe or finding out you’ve overpaid taxes, the only resolution is suing your landlord.
That’s why the BWA is proposing formal dispute resolution tools.
A Commercial Tenants Board or similar affordable out-of-court mediation tool will help reduce court backlogs that many provinces are experiencing. Affordable dispute resolution would help reduce red-tape between businesses & landlords and reduce legal costs for both parties.
Do Provinces have Standardized Leases for Commercial Tenants?
No.
In Ontario and every other Canadian province there are no template or standard lease document. This means that every Landlord will have a unique lease for you to negotiate.
If you’re signing or re-signing a Commercial Lease, you may have to spend thousands of dollars on lawyers to navigate documents that are dozens of pages long. Even after spending this money, there’s no guarantee that a Commercial Landlord will accept any lease amendments.
Standard Leases help by creating easier to understand documents. Especially for entrepreneurs who don’t have English (or French in Quebec) as a first language, their comprehension of this document can be fatal for their business.
Standard Leases can be signed in days or a couple of weeks instead of the usual 2-3 months it takes to sign a Commercial Lease in Canada.
How Much Can My Landlord Increase Commercial Rent in Canada?
There are no limits to Commercial Rent Increases in Canada.
Many Landlords understand that a 10, 30 or 50% increase isn’t good for their renter’s business (or their own!).
However, without a rent increase cap, some will use it as an opportunity to charge established businesses exorbitant increases during lease renewals. Whether it’s to kick out a tenant or because the landlord thinks the tenant can bear the increase – it’s totally legal.
We’ve all heard stories of a restaurant becoming popular and then shutting down a couple years later because the landlord wanted a 100% rent raise. This happens all the time – but most business owners are afraid to speak in case their next potential landlord sees them as troublesome.
This has caused many businesses to leave beloved neighbourhoods after decades – or simply close their doors forever. Creating thriving neighbourhoods starts with making sure businesses have consistent operations – major rent increases are the biggest disruptor to otherwise successful main street enterprises.
Do Commercial Landlords Need to Offer a Lease in Canada?
Commercial Landlords do not need to offer a lease in Canada. Often this is used as a way to drive a tenant out of a space over time. When a lease comes up for renewal, a landlord doesn’t need to offer a new lease – they can keep the tenant on a month-to-month lease.
On a month-to-month basis, the landlord can jack up the rent by any amount. This often happens to restaurants after they’ve spent 10s, if not 100s of thousands of dollars on improvements to the space.
Implementing Standard Leases would help businesses avoid this situation.
What Rights Do I Have as a Commercial Tenant?
You have the right to enter into a commercial lease. That’s about it. The Commercial Tenant / Landlord relationship in Ontario is completely a one-way street for rights. Landlords hold all the power in this relationship.
Developing reasonable regulations through basic rights for commercial renters will help businesses plan better for success and improve Canada’s productivity.
Updating Commercial Tenancies Acts in all provinces will benefit both Landlords and Tenants through more streamlined relationships.
As a Tenant, do I have to pay rent if my landlord owes me money?
Strangely, yes. If your landlord owes you money, you cannot withhold rent until the money owed to you is paid.
This scenario occurs more often than you might think, especially if the landlord fails to fulfill their obligations. Tenants have several options:
- Seek Legal Advice: Consult a legal expert to understand your rights and consider pursuing legal action.
- Continue Paying Rent: Even if your landlord owes you $1 Million bucks, they can still evict you for non-payment of rent after 16 days. Keep paying your rent to strengthen your negotiating position – or legal case if you must sue.
- Negotiate a Settlement: Attempt to reach an out-of-court agreement with the landlord for compensation or rent reduction.
We are proposing legislation in Ontario and other provinces to change this. Nobody should be evicted when their landlord owes them for repairs or overpaid taxes. Read about it here and see how Tenant-Landlord offsets could help level the commercial lease playing field.
Types of Leases
What are the different types of commercial leases?
Understanding the various types of commercial leases is critical before you sign any documentation. Here are common types of commercial leases in Canada:
- Net Lease: The tenant pays base rent plus some or all of the property expenses such as taxes, insurance, and maintenance.
- Single Net Lease: The tenant pays rent plus property taxes.
- Double Net Lease: The tenant pays rent, property taxes, and insurance.
- Triple Net Lease: The tenant pays rent, property taxes, insurance, and maintenance costs. If you’re a retailer, we recommend avoiding NNN at all costs, find out why.
- Gross Lease: The tenant pays a single rent amount, and the landlord covers most property expenses.
- Full-Service Lease: Similar to a gross lease, but typically includes all utilities and services.
- Modified Gross Lease: Costs are split between the tenant and landlord in a predefined manner.
- Percentage Lease: The tenant pays a base rent plus a percentage of their gross income from the business.
What should I know before signing a commercial lease?
Signing a commercial lease is a significant commitment, so it’s vital to understand all aspects of the agreement:
- Lease Term: Know the length of the lease and any options for renewal.
- Rent and Increases: Understand the base rent, any additional expenses, and how rent may increase over time.
- Repairs and Maintenance: Clarify who is responsible for repairs and maintenance.
- Modifications: Determine if you can make changes to the space and who pays for them – and who owns them at the end of the lease.
- Exit Clause: Know the conditions under which you can terminate the lease early.
- Parking: Is there adequate parking for employees and customers.
- Other Clauses: Be aware that some leases may include clauses allowing a landlord to increase rent by any amount at any time. If you spot this in any proposed lease, we recommend negotiating it out.
What Fixtures Does My Landlord Own?
In Ontario & many provinces, fixtures that would be considered the landlord’s property, often referred to as “landlord’s fixtures,” typically include:
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Structural Fixtures: These are fixtures that become part of the building’s structure and are intended to remain there permanently. Examples include walls, doors, windows, HVAC, roofing materials, and plumbing systems.
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Permanent Fixtures: These are items installed with the intention of being permanent and not easily removable without causing damage to the property. Examples include built-in cabinets, central heating systems, and built-in lighting fixtures.
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Improvements Paid for by the Landlord: If the landlord has paid for certain improvements or installations, these are generally considered the landlord’s property. Examples include HVAC systems, electrical wiring, and major plumbing installations.
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Fixtures Specified in the Lease Agreement: The lease agreement may specify certain fixtures that will remain the landlord’s property regardless of who installed them. It’s essential for tenants to carefully review these clauses to understand their obligations and rights.
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Common Area Fixtures: Fixtures installed in common areas, such as lobbies, hallways, and restrooms, are typically the landlord’s property. Examples include elevators, common area lighting, and security systems.
Landlord’s fixtures are generally those that are intended to be permanent parts of the property or those that have been explicitly stated in the lease agreement as belonging to the landlord. It is important for any tenant to specifically define in the lease contract what you are/aren’t willing to leave behind if you ever have to relocate.
Can a commercial landlord in Ontario raise the rent during a lease renewal and then charge a lower amount to a future tenant?
Yes, a commercial landlord in Ontario can raise the rent during a lease renewal and subsequently charge a lower amount to a future tenant.
This situation is governed by the terms set out in the lease agreement and is subject to negotiation between the landlord and the tenant.
1. Lease Agreement Provisions:
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- The lease agreement typically outlines the conditions for rent increases, including the amount of notice required and any caps on the increase. Tenants should review these terms carefully before signing the lease.
- If the lease does not specify these conditions, landlords have more flexibility in setting new rent terms during renewal.
- Potential for Rent Discrepancy:
- This practice of raising rent for renewing tenants while charging lower rents to new tenants can be seen as unfair. It places an undue burden on existing tenants who have established their businesses and invested in the location. This situation highlights the need for the Commercial Renter Bill of Rights, which aims to provide fairer conditions for tenants, including more transparent and equitable rent practices. Ensuring tenants are not subjected to arbitrary and significant rent hikes during renewals would promote stability and fairness in the commercial rental market.
Commercial Rent is a top expense for most businesses. Leases don’t always address repair timelines, and if they do, commercial tenants often pay for repairs and simply hope their landlord will pay them back.
Even with a commercial lease, it’s legal for a landlord to increase rent by any amount at the end of a term.
We recognize many commercial landlords are small business owners who understand that small & predictable rent increases are the best way to protect their own future income. But not every Landlord has received that memo.
That’s why we launched CommercialRent.ca and this Commercial Rent FAQ. We are a group of Canadian businesses that believe it’s time for basic commercial tenant rights. The Commercial Renter Bill of Rights is a simple guideline for Canada’s provincial governments to create basic tenant protections.
We can’t create and sustain good local jobs when the rent goes up by 30%. Let’s keep good jobs and thriving businesses in our communities with basic renter protections.
Do you agree? Sign the Commercial Renter Bill of Rights and send a message to your elected officials to support fairness for local businesses.
If we don’t protect our business’ ability to operate through Commercial Rent Modernization, how can we expect businesses to protect our employees?