Toronto Commercial Real Estate Lawyers
Commercial Property Purchases, Sales, Lease Reviews and Landlord-Tenant Matters
Commercial real estate transactions often involve significant financial commitments, complex agreements and legal obligations that differ from residential property transactions.
At Capulli Law LLP, we assist business owners, commercial property investors, landlords and tenants with commercial real estate matters throughout Toronto and the Greater Toronto Area.
Our services include commercial property purchases and sales, commercial agreements of purchase and sale, commercial lease reviews, lease negotiations, title investigations and commercial landlord-tenant matters.
We help clients identify legal risks, understand contractual requirements and address issues that may arise before a transaction closes or during a commercial tenancy.
Commercial Property Purchases
Purchasing an industrial, office, retail or other commercial property requires careful legal and commercial due diligence.
Reviewing the Agreement of Purchase and Sale
A commercial agreement of purchase and sale may contain detailed provisions regarding the purchase price, deposits, due diligence, financing, representations, warranties, existing tenancies and closing obligations.
Unlike a standard residential transaction, there may be fewer contractual protections unless they are specifically negotiated.
Purchasers should seek legal advice before entering into a binding commercial purchase agreement.
Title Searches and Registered Interests
A title investigation can identify mortgages, easements, restrictive covenants, agreements, rights of way and other registered interests affecting the land.
Some registered instruments may restrict development or use of the property.
The purchaser must determine which interests are acceptable, which require further investigation and which must be discharged or resolved before closing.
Reviewing the Agreement of Purchase and Sale
A commercial agreement of purchase and sale may contain detailed provisions regarding the purchase price, deposits, due diligence, financing, representations, warranties, existing tenancies and closing obligations.
Unlike a standard residential transaction, there may be fewer contractual protections unless they are specifically negotiated.
Purchasers should seek legal advice before entering into a binding commercial purchase agreement.
Title Searches and Registered Interests
A title investigation can identify mortgages, easements, restrictive covenants, agreements, rights of way and other registered interests affecting the land.
Some registered instruments may restrict development or use of the property.
The purchaser must determine which interests are acceptable, which require further investigation and which must be discharged or resolved before closing.
Zoning and Permitted Use
A purchaser should confirm that the intended use of a commercial property is permitted under applicable zoning and other regulatory requirements.
For example, a business intending to operate a manufacturing facility, warehouse, showroom or retail operation should consider whether the municipality permits that activity at the property.
Depending on the intended operation, additional approvals, licences or certificates may be necessary.
A lawyer can assist with reviewing available legal documentation, but technical zoning and building-code compliance may require municipal confirmation or specialist advice.
Environmental Due Diligence
Environmental contamination can create substantial liabilities for commercial property owners.
Depending on the property and its history, an environmental assessment may be appropriate.
A Phase I or Phase II Environmental Site Assessment, where required or recommended, must be performed by qualified environmental professionals.
Existing Commercial Tenants
Where a building is being purchased subject to commercial leases, the purchaser should review the leases, rent rolls, security deposits, renewal rights, arrears and any outstanding disputes.
The purchaser should understand which obligations it will assume as the new landlord.
Commercial Property Sales
Commercial vendors should understand their contractual obligations before accepting an offer.
Important matters include existing leases, representations and warranties, mortgage discharge requirements, HST treatment, closing adjustments and the delivery of required corporate or property documentation.
Commercial Sale Representations
An agreement may require the seller to make statements concerning ownership, existing leases, litigation, compliance or other matters.
Sellers should carefully consider the scope of these representations and the consequences if they are inaccurate.
Mortgage Discharges and Closing
Existing registered mortgages or other encumbrances may need to be discharged or otherwise addressed as part of closing.
The seller’s lawyer reviews closing requirements, prepares required documents and coordinates completion of the transaction.
Commercial Lease Reviews
A commercial lease is often one of the most important contracts a business signs.
Unlike most residential tenancies, commercial leases generally involve extensive freedom of contract. The specific written terms can substantially affect the rights and obligations of both landlord and tenant.
Commercial Property Sales
Commercial vendors should understand their contractual obligations before accepting an offer.
Important matters include existing leases, representations and warranties, mortgage discharge requirements, HST treatment, closing adjustments and the delivery of required corporate or property documentation.
Commercial Sale Representations
An agreement may require the seller to make statements concerning ownership, existing leases, litigation, compliance or other matters.
Sellers should carefully consider the scope of these representations and the consequences if they are inaccurate.
Mortgage Discharges and Closing
Existing registered mortgages or other encumbrances may need to be discharged or otherwise addressed as part of closing.
The seller’s lawyer reviews closing requirements, prepares required documents and coordinates completion of the transaction.
Commercial Lease Reviews
A commercial lease is often one of the most important contracts a business signs.
Unlike most residential tenancies, commercial leases generally involve extensive freedom of contract. The specific written terms can substantially affect the rights and obligations of both landlord and tenant.
Base Rent and Additional Rent
Base rent is the principal rent payable for occupying the premises.
Additional rent may include property taxes, insurance, maintenance costs, operating expenses and other amounts determined by the lease.
A tenant should understand the full occupancy cost rather than relying only on the advertised base rent.
What Is TMI?
TMI commonly refers to taxes, maintenance and insurance.
Commercial leases may require tenants to pay their proportionate share of these expenses in addition to base rent.
The precise meaning, calculation and scope of TMI depend on the lease. Tenants should review permitted charges, exclusions, estimates, year-end reconciliations and audit rights.
Repair and Maintenance Obligations
A commercial lease may allocate responsibility for heating and cooling systems, plumbing, electrical systems, roof repairs, structural elements, interior repairs and other maintenance.
These obligations can create significant expenses, particularly where the tenant is responsible for major building systems.
Personal Guarantees
Commercial landlords may require the business owner’s personal guarantee.
A personal guarantee can expose the individual guarantor to liability beyond the assets of the tenant corporation.
The scope, duration and limits of the guarantee should be carefully considered before signing.
Renewal Options
A lease may give a tenant an option to renew, but the right may depend on strict notice requirements and the absence of specified defaults.
Tenants should understand the renewal deadline, how renewal rent is determined and whether the option can be assigned.
Assignment and Subletting
A tenant may wish to sell its business, assign its lease or sublet the premises.
The lease may require landlord consent and may impose conditions or continuing liability on the original tenant.
Personal Guarantees
Commercial landlords may require the business owner’s personal guarantee.
A personal guarantee can expose the individual guarantor to liability beyond the assets of the tenant corporation.
The scope, duration and limits of the guarantee should be carefully considered before signing.
Renewal Options
A lease may give a tenant an option to renew, but the right may depend on strict notice requirements and the absence of specified defaults.
Tenants should understand the renewal deadline, how renewal rent is determined and whether the option can be assigned.
Assignment and Subletting
A tenant may wish to sell its business, assign its lease or sublet the premises.
The lease may require landlord consent and may impose conditions or continuing liability on the original tenant.
Default and Termination
Commercial leases often contain provisions addressing unpaid rent, breaches of covenant, notice requirements, re-entry, termination and recovery of damages.
These provisions should be reviewed carefully because the consequences of default can be substantial.
Commercial Landlord Representation
Commercial landlords may require legal assistance with preparing leases, reviewing offers to lease, addressing rent arrears, enforcing lease obligations and resolving disputes.
Unpaid Commercial Rent
Where a commercial tenant does not pay rent, the landlord’s remedies may depend on the lease and Ontario’s Commercial Tenancies Act.
Section 18(1) of that Act contains a statutory re-entry provision where rent remains unpaid for 15 days, unless otherwise agreed. Whether re-entry is legally available and how it may be exercised require consideration of the lease, payment history, relief from forfeiture and other relevant circumstances.
Landlords should obtain legal advice before changing locks, taking possession or disposing of a tenant’s property.
Breach of Lease
Disputes can also arise from unauthorized use, failure to maintain the premises, insurance issues, assignment without consent or other breaches of the lease.
The available remedies depend on the contractual terms, legislation and the seriousness of the breach.
Commercial Tenant Representation
Commercial tenants should understand their legal obligations before committing to premises.
Permitted Use
A tenant should confirm that the lease permits its intended business activities and that the contemplated use can comply with applicable municipal requirements.
Tenant Improvements
A lease should clearly address who pays for construction, whether a landlord contributes to improvements, which approvals are required and what happens to fixtures and improvements at the end of the tenancy.
Early Termination
A commercial tenant generally cannot assume it has the right to terminate a fixed-term lease simply because the business is struggling.
Early termination rights depend on the lease, applicable law and any negotiated surrender agreement.
Tenant Improvements
A lease should clearly address who pays for construction, whether a landlord contributes to improvements, which approvals are required and what happens to fixtures and improvements at the end of the tenancy.
Early Termination
A commercial tenant generally cannot assume it has the right to terminate a fixed-term lease simply because the business is struggling.
Early termination rights depend on the lease, applicable law and any negotiated surrender agreement.
Frequently Asked Questions
What should a lawyer review before a commercial property purchase?
The agreement of purchase and sale, title, registered agreements, existing leases, financing requirements, corporate authority, closing obligations and other legal aspects of due diligence.
Environmental, building-condition and technical matters may require specialized professionals.
What is TMI in a commercial lease?
TMI generally refers to taxes, maintenance and insurance, although the lease may define additional rent more broadly.
The lease determines which costs are recoverable from the tenant and how they are calculated.
Is a personal guarantee necessary in a commercial lease?
Not in every lease. A landlord may request one, particularly where the tenant is a new or closely held corporation.
Whether to accept a guarantee is a matter for negotiation. Tenants should understand the potential personal exposure and consider negotiating limits.
Can a commercial landlord change the locks?
In some circumstances, a commercial landlord may have a lawful right of re-entry or forfeiture. However, the landlord must consider the lease, applicable legislation and potential legal challenges before taking action.
An improper lockout may expose the landlord to legal liability.
What happens when a commercial tenant does not pay rent?
Depending on the lease and circumstances, the landlord may have remedies involving recovery of arrears, distress where legally available, termination, re-entry or litigation.
The appropriate remedy depends on the facts, and landlords should avoid assuming that every remedy can be exercised simultaneously.