What happens if a lease is assigned without the landlord’s consent in Ontario?

The Government of Ontario’s guide to renting commercial property says tenants can sublet or assign the lease unless the lease prohibits it. Under s.23(1) of the Commercial Tenancies Act, a covenant against assigning without consent, in a lease made after the 1st day of September, 1911, is deemed, unless the lease contains an express provision to the contrary, to be subject to a proviso that consent is not to be unreasonably withheld.

If the landlord refuses or neglects

Under s.23(2), if the landlord refuses or neglects to give a licence or consent to an assignment or sub-lease, a judge of the Superior Court of Justice, on the application of the tenant, assignee or sub-tenant, may decide whether consent is unreasonably withheld. If the judge is of that opinion, the judge may permit the assignment or sub-lease, and the order is the equivalent of the landlord’s consent.

Re-entry and forfeiture

Under s.19(2), a right of re-entry or forfeiture for breach of a covenant or condition, other than a proviso about rent, is not enforceable unless the lessor serves a notice specifying the breach, requiring the lessee to remedy it if it is capable of remedy and, in any case, to make compensation in money. The lessee must also fail within a reasonable time to remedy the breach, if capable, and to make reasonable compensation to the lessor’s satisfaction. Under s.20(1), where a lessor is proceeding to enforce a right of re-entry or forfeiture, the lessee may apply to the court for relief, which the court may grant on terms. Section 20(7)(a) says section 20 does not extend to a covenant or condition against assigning, underletting, parting with the possession, or disposing of the land leased. That exclusion is limited to section 20, and its words do not say section 19 ceases to operate.

A consent covers only what it says

Under s.24, a licence to do an act that would otherwise be a forfeiture extends, unless otherwise expressed, only to the permission actually given, the specific breach, or the actual assignment, under-lease or other matter specifically authorized, and does not prevent a proceeding for a subsequent breach unless the licence says otherwise. BDC says to make sure key contracts, such as leases, can be assigned to you if necessary. It also says it is always best to have a lawyer, preferably one specializing in commercial real estate, review a lease agreement.

The Government of Ontario’s guide says it can be helpful to speak with a lawyer about how to negotiate and draw up a lease. The Law Society Referral Service can help landlords and tenants find a lawyer who will provide a free consultation. See how landlord consent works in a business purchase for the general process.