A commercial lease review checklist for buying a Canadian business covers assignment rights, landlord consent, personal guarantees, rent terms and leasehold improvements — the lease clauses that determine whether a buyer can actually keep operating in the same location after closing.
Reviewed
This checklist covers what to review in a commercial lease before buying a Canadian business that operates out of leased premises. A business is often worth meaningfully less if it cannot stay in its current location, so lease review belongs early in due diligence, not as a formality handled the week before closing.
Confirm the lease can actually be assigned
Find the assignment clause and confirm what standard applies to landlord consentSome leases require consent 'not to be unreasonably withheld,' while others give the landlord broad discretion to refuse — the difference changes a buyer's negotiating position considerably.
Check whether the landlord has a right of first refusal or a right to terminate on a proposed assignmentA landlord who can reclaim the space instead of consenting to assignment is a risk that needs to be flagged and addressed well before the deal is firm.
Confirm how much notice the lease requires before requesting assignment consentLandlord consent can take longer than either party expects, and a rushed request close to the target closing date is a common cause of delayed transactions.
Check the financial terms
Confirm the remaining term and whether any renewal options are still available and on what conditionsA short remaining term with no renewal option materially changes what the location, and the business built around it, is actually worth to a buyer.
Review the rent schedule, including any escalation clauses, for the remaining termA lease with steep scheduled rent increases can quietly erode the margin a buyer is counting on a few years into ownership.
Get a clear breakdown of additional rent and common area charges, not just base rentAdditional rent can add substantially to occupancy cost, and a buyer comparing offers needs the full number, not just the headline base rent figure.
Request an estoppel certificate from the landlord confirming rent, term and no outstanding defaultsThis is the landlord’s own written confirmation, and it protects a buyer from inheriting a dispute the seller never mentioned.
Check guarantees, deposits and improvements
Confirm whether the current owner gave a personal guarantee and how it gets released on assignmentA red flag is a seller who has not thought about this — an unreleased personal guarantee can leave them on the hook for a business they no longer own.
Confirm who owns the leasehold improvements and what happens to the security deposit on assignmentLeasehold improvements can represent significant sunk cost, and it matters whether they transfer with the assignment or need to be separately negotiated.
Check whether the landlord will require a new deposit or guarantee from the incoming buyerSome landlords use an assignment as an opportunity to reset security requirements, which affects the buyer’s closing-day cash needs.
Check use, exclusivity and default history
Confirm the permitted use clause covers exactly what the business currently does and what a buyer might want to addA narrow permitted-use clause can block a buyer’s plans to expand the offering even if the space physically supports it.
Ask whether any exclusivity or non-compete radius clause in the lease affects the businessSome shopping centre and plaza leases restrict what a nearby unit can sell, which can work for or against a buyer depending on what they plan to do.
Ask the landlord directly whether there is any history of default, notice or dispute on the leaseA seller’s account of the relationship and the landlord’s account do not always match, and it is worth hearing both before relying on either.
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.