Commercial leases in an Ontario business sale

In a huge number of Ontario business sales, the lease is not a background document — it is close to the actual product being sold. A buyer is not just acquiring a customer list and some equipment, they are acquiring the right to keep operating at that specific address, on those specific terms, for whatever term is left. Handling the lease correctly is often the single biggest scheduling risk in an Ontario closing.

Landlord consent is the starting point, not a formality

Most commercial leases in Ontario require the landlord’s written consent before a tenant can assign the lease to a buyer, and Ontario’s Commercial Tenancies Act sits alongside the lease’s own terms in governing that relationship. Some leases specify that consent cannot be unreasonably withheld; others give the landlord considerably more discretion, including in some cases a right to terminate the lease and reclaim the space rather than consent to a new tenant. Read the assignment clause closely, and approach the landlord early — a landlord who feels ambushed by a signed deal has far more leverage than one who was consulted from the start.

An estoppel certificate confirms what the lease actually says

Rather than relying on the seller’s summary of the lease, buyers and their lenders typically ask the landlord for an estoppel certificate — a short written confirmation of the rent, the remaining term, any renewal options, and whether the tenant is currently in default. A landlord who refuses to provide one, or provides one that contradicts what the seller described, is telling you something worth investigating before you close, not after.

A personal guarantee does not automatically follow the assignment

If the current owner personally guaranteed the lease — a common requirement for a smaller Ontario tenant — that guarantee generally does not transfer to the buyer automatically, and the landlord will often insist on a fresh personal guarantee from the buyer as a condition of consenting to the assignment. Sellers sometimes assume their guarantee simply ends when they sell; in practice it can remain in force until the landlord formally releases them, which is worth negotiating explicitly as part of the deal rather than assuming.

Who owns the leasehold improvements is a real question, not an assumption

Improvements made to the space — flooring, fixtures, built-in millwork, signage — are not automatically the tenant’s property to sell once the lease ends, and many Ontario commercial leases include a clause addressing exactly this, sometimes giving the landlord a claim to fixtures left behind. A buyer effectively paying for these improvements as part of the purchase price needs to know, before they commit, whether the lease actually lets the tenant treat them as an asset.

Very long leases can bring land transfer tax into the conversation

Ontario treats certain very long-term leases, including renewal options, in a manner that can trigger Land Transfer Tax obligations similar to a transfer of the property itself — a detail few tenants think about because leases feel categorically different from owning real estate. If your lease has an unusually long remaining term with multiple renewal options, this is worth raising with your lawyer specifically, rather than assuming leases are always outside the scope of that tax.

Sequence the lease work before the rest of the closing

Because landlord consent, the estoppel certificate and any new guarantee typically take longer to arrange than either party expects, the lease is usually the item that should be started first, in parallel with negotiating the purchase agreement, rather than left until the financial and legal due diligence is otherwise complete. A deal that is fully negotiated everywhere except the lease is not, in any practical sense, close to closing.

Insurance and realty tax adjustments happen alongside the assignment

A lease assignment in Ontario is rarely just about the landlord’s consent — it also usually triggers a reconciliation of property tax and common area maintenance charges as of the assignment date, and a change in who is named on the tenant’s liability and property insurance. Buyers should confirm what insurance certificate the lease actually requires before closing, since a landlord who discovers the new tenant is under-insured relative to the lease’s own requirements can hold up occupancy even after formally consenting to the assignment. Build time for this into the closing schedule rather than treating it as an afterthought once the assignment itself is signed.

• Read the assignment and consent clause in the lease before you go further
• Approach the landlord early, before the purchase agreement is signed if possible
• Request an estoppel certificate confirming the lease’s actual terms
• Confirm whether a new personal guarantee will be required of the buyer
• Check the lease’s treatment of leasehold improvements before pricing them into the deal