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Some Key Points to Consider When Entering a Commercial Lease as a Tenant – Part Four
Taimoor Qureshi
May 9, 2025
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In previous blog posts, we provided an introduction into some keys points that you need to consider when entering into a commercial lease as a tenant:
In this blog post, we will go into a bit more detail about some of those items.
Rights of Renewal and Extension:
Most commercial leases usually have a term ranging anywhere from three (3) years to five (5) years. On rare occasions, up to ten (10) years. So, what happens once the lease term is at an end? Well, that would depend on if the lease had a provision that allows the tenant to renew and extend the lease for additional terms. Failing which, as a tenant you may have to vacate the premises at the end of the lease term or if the lease has an overholding clause, pay rent at a significantly higher rate on a month-to-month basis.
Therefore, it is imperative to negotiate a right of renewal and extension in the lease document from the onset. Special attention must be given to any notice deadlines in relation to this. There will often be language in the lease requiring the tenant to provide notice of renewal to the landlord within a certain number of days prior to the end of the ongoing lease term.
Rights of First Refusal on a Purchase Offer:
After being a tenant on the leased premises for a few years and figuring out that the location is very vital for your business, you may want to set roots for your business in the same location. What happens if the landlord decides to sell the property? While any incoming owner/new landlord of the premises will have to honor the existing terms of the lease, there is no obligation on the new landlord to sign any further amendments to the lease extending the lease term beyond any allocated extension rights already in the lease.
To prevent such a scenario, it is very important to negotiate a right of first refusal on a third-party purchase offer as part of the lease. This allows the tenant to match any purchase offers the landlord may receive from any third-party purchasers within a certain amount of time from receiving notice of any such offer(s).
Prior to signing any commercial lease agreement, it is essential to have it reviewed by a lawyer who is well versed in commercial tenancies.
For more information about this topic, please feel free to contact one of our lawyers! Email us at info@kormans.ca or call (905) 270-6660.
Taimoor’s practice areas include Commercial law; Commercial Leasing; Corporate law; Mortgages; Residential Real Estate; and Wills and Estates.Taimoor was called to the Bar of Ontario and joined Kormans LLP in January 2019.Prior to joining Kormans LLP, Taimoor articled and clerked for boutique law firms where his exposure to residential and commercial matters from beginning to end helped develop his knowledge and skills in the aforementioned areas of la.
Taimoor is a strong believer in efficient client communication and does his best to keep clients as up to date as possible along all steps of a transaction.In his spare time, Taimoor is an avid follower of all major sports and enjoying the outdoors during the summer months.
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