What happens if the lease has already expired by the time the sale closes?

A closing date can fall after the lease’s term has ended, whether because a renewal was never exercised or because talks on a new term are still open. The buyer then needs to know what right the seller actually has to occupy, and the answer differs by province. Start with the lease itself, then ask the landlord to confirm the position in writing. For the wider lease review, see what to check in the lease.

Québec: expiry, tacit renewal and guarantees

Article 1877 of the Civil Code of Québec says a lease with a fixed term terminates by operation of law at the end of its term. Article 1879 says a lease is renewed tacitly where the lessee continues to occupy the premises for more than 10 days after expiry without opposition from the lessor, and article 1878 allows tacit renewal of a lease of an immovable. Article 1881 provides that security given by a third person for the lessee’s obligations does not extend to a renewed lease, so ask whether any guarantee must be given again.

Ontario and BC: holding over

Section 58 of Ontario’s Commercial Tenancies Act provides that a tenant who wilfully holds over after the term ends, and after written notice to deliver up possession from the landlord, the person entitled to the reversion or their authorized agent, pays a penalty measured by the yearly value of the land for as long as it is detained, with no relief against that penalty. Section 74 lets the landlord apply to a judge against a tenant who wrongfully refuses or neglects to leave. BC’s Commercial Tenancy Act has a similar holdover penalty in section 15 and a Supreme Court application in section 18.

Fixing it before closing

Ask for a written extension, renewal or new lease signed by the landlord, and consider making it a condition of closing so the buyer does not pay for a business with no secure premises. Check whether any guarantee, deposit or renewal right carries into the new term. That is a question for the buyer’s lawyer.