Commercial Tenancies in Ontario

0
901
Modern office buildings in Central Hong Kong.

There are two different types of tenancies – residential and commercial. Consequently, there are different laws and different institutions dealing with all rental matters. The owner of a rental property is called the lessor or landlord, and the other person is called the lessee or tenant. A lease may be:

  • a fixed-term agreement, in other words one of these two: for a specified period of time (the “term”), and end when the term expires; conditional, i.e. last until some specified event occurs, such as the death of a specified individual;
  • a periodic agreement, in other words renewed automatically usually on a monthly or weekly basis at will, i.e. last only as long as the parties wish it to, and be terminated without penalty by either party.

Because ownership is retained by the lessor, he or she always has the better right to enforce all the contractual terms and conditions affecting the use of the commercial property. Normally, the contract sets out in full and, hopefully, plain language, all these terms and conditions. One important right that may or may not be allowed the lessee, is the ability to create a sublease or to assign the lease, i.e. to transfer control to a third party.

Ministry of Municipal Affairs and Housing of Ontario

http://www.mah.gov.on.ca/

If you want to find comprehensive information about commercial leases consult the brochure “Commercial Tenancies Act: What you need to know” or call (416) 585-7373 or 1-800-729-4871 (toll-free) to access the automated information of the Ministry of Municipal Affairs and Housing of Ontario. The information provided on this system is not for residential landlords and tenants.

If there is any question about whether a tenancy is residential or commercial, the Landlord and Tenant Board will hold a hearing and make a decision. Either the landlord or the tenant may apply to the Board. The Board can be reached by calling 1-888-332-3234 or 416-645-8080 in the Toronto area.

Many commercial leases have terms and conditions that govern the commercial landlord and tenant relationship despite the provisions of the Commercial Tenancies Act. It is recommended that you seek legal advice on how the Commercial Tenancies Act applies to your specific situation.

Commercial Tenancies Act

This law does NOT apply to residential tenants and landlords. It is about commercial tenancies only. For residential landlord / tenant issues, please visit the Landlord and Tenant Board’s website or phone (416) 645-8080 or 1-888-332-3234 (toll-free).

Ontario’s Commercial Tenancies Act (the Act) outlines the relationship, rights and obligations between commercial landlords and tenants. The following information broadly outlines the most frequently asked questions about the Act.

Whether you are a commercial tenant, sub-tenant or landlord, it is strongly recommended that you obtain legal advice to assist you with interpreting how the Commercial Tenancies Act applies to your specific situation. The Law Society of Upper Canada provides a nominal fee referral service that can put you in touch with an appropriate lawyer in your community. The Law Society of Upper Canada can be contacted at: 1-900-565-4577

It is important to be aware that a signed lease agreement may take precedence over the Commercial Tenancies Act. Typically a lease agreement sets out the specific obligations for both commercial landlords and tenants such as rent, maintenance, operating costs, leasehold improvements, and other matters. Both landlords and tenants should carefully read their lease agreement as the majority of leases have terms and conditions that spell out the obligations of each party.

Non-payment of Rent

A landlord may change the locks of the unit and evict on the 16th day after the day rent was due. The landlord is not obligated to notify the tenant that the locks will be changed.

Example

  • January 1st – rent due
  • January 17th – locks can be changed without notification

Note:

  • Landlords and/or tenants should not force their way into the premises.
  • After the locks have been changed, landlords should allow tenants reasonable access to the rental unit to remove their property.

A landlord may seize and dispose of a tenant’s property that is contained within the rented premises. The landlord is not required to give advance notice of seizing the tenant’s property, unless the lease provides for it. However, landlords are required to notify the tenant of the distress and the sum of monies required to cure the default before proceeding to sell the seized property. Before disposing of seized property, the landlord must hold it for five days. If the proper payment is made by the tenant in this five day period, the landlord is not permitted to sell the tenant’s property. Otherwise, after the proper appraisals are made, the property can be sold. Both landlords and tenants are advised to seek legal advice in their specific situations.

Example

  • January 1st – rent due and not paid
  • January 2nd or later – seize tenant’s property and notify the tenant of intent to dispose
  • Five days after seizure – obtain appraisals and dispose of tenant’s property if the proper payment is not made by the tenant.

Note:

  • The Act requires two appraisals before selling or disposing of a tenant’s property.
  • The proceeds from the disposal of a tenant’s property are to be applied to the rental arrears. In the event that proceeds exceed the amount of the arrears, a landlord is obligated to reimburse the excess amount to the tenant.
  • Some types of tenant property cannot be seized, for example, property that is leased or co-owned.
  • Sub-tenants who continue to pay the full rent cannot have their property seized if the head tenant failed to pay the rent to the landlord. In the event that a sub-tenant’s property is seized, the landlord would be required to return the goods.
  • Commercial tenants who wish to dispute their landlord’s actions may apply to the Superior Court of Justice.

Rent Increases

Most commercial tenancy agreements outline in detail issues such as the amount of rent charged and frequency of rental fee increases. In the event that there isn’t a current tenancy agreement, the landlord may increase the rent by any amount at any time. The Act does not regulate rent increases.

Note:

Landlords should always consider giving a tenant a reasonable notice of a rent increase in writing.

Interest on Rent Deposits

Under the Act, a landlord is not required to pay interest on a commercial tenant’s security deposit. However, it is possible that a lease agreement requires a landlord to pay interest on a security deposit or last month’s rent.

Notice to End a Tenancy

Month-to-month tenancies

Under the Act, either a landlord or a tenant can terminate a tenancy with a minimum one-month written notice. The last day of the tenancy would be the last day of the rental period.

Example

  • March 31st – written notice delivered to other party
  • April 1st – first day of rental period
  • April 30th – tenancy terminated

Note: The written notice of termination should include:

  • landlord’s name
  • tenant’s name
  • address or description of the rental unit
  • date that the tenancy should terminate
  • date the notice is served

Fixed-term Tenancy Agreements

Fixed-term tenancy agreements specify the length or term of the lease. Under the Act, once the tenancy ends, the tenant no longer has the right to occupy the premises. If a tenant continues to occupy the rental premises after the landlord has requested they move out, they may be subject to a penalty of two months rent for every month they remain on the premises, plus applicable costs. In addition to imposing a financial penalty, the landlord may also apply to the Ontario Superior Court of Justice to obtain an eviction order.

Example

Under a three-year lease agreement, the tenant is expected to leave the premises at the end of the three years.

Note: Landlords and tenants can agree to renew a fixed-term tenancy agreement.

Commercial Landlords:

Rights and obligations

  • Landlords must notify tenants in writing of specific breaches of the lease and allow a reasonable period of time for them to comply.
  • Landlords may have the right to terminate a tenancy when tenants fail to fulfil their obligations as outlined in the lease.
  • Landlords have the right to apply to the Superior Court of Justice (or depending on the amount, Small Claims Court) to seek damages from the tenant for the loss of rental income owed for the balance of the term of the lease.

Commercial Tenants:

Rights and obligations

  • Tenants must pay their rent on the due date agreed on in the lease with the landlord.
  • Tenants cannot hold back rent because a landlord has failed to fulfill their obligations as outlined in the lease.
  • Tenants must fulfill their obligations as outlined by the lease agreement.
  • Tenants have the right to take their disputes with the landlord to Small Claims Court for disputes concerning money or personal property under $10,000. Otherwise, an application must be made to the Superior Court of Justice.

Note: Court office addresses and phone numbers are listed in the blue pages of your local phone directory. For more information, you can contact the Commercial Tenancy Information Line at: (416) 585-7373 or 1-800-729-4871

Frequently Asked Questions on the Commercial Tenancies

LEASES

No, the rights and obligations set out in a lease do not renew on a monthly basis when the lease expires.

A tenant has two options in this situation: to take the landlord to Small Claims Court to recover costs, or to go to Superior Court of Justice and get a court order requiring the landlord to fulfil the conditions of the lease. In court, the tenant could also ask for compensation for losses incurred as a result of the landlord’s actions, such as lost business. Tenants should speak to a lawyer to evaluate the options.

According to contract law, a tenant is obligated to pay for the full term of a lease agreement, unless the lease has a clause allowing the tenant to end the tenancy early. However, tenants are allowed to sub-let or assign a lease to someone else, unless the lease prohibits it. As well, a landlord could choose to work out an agreement with the tenant, such as requiring rent payments until the unit is re-rented. If the tenant vacates before the end of the lease, it is expected that the landlord will try to find a new tenant. If the landlord cannot find a new tenant, or loses any money because of the breach of the lease, the landlord may be able to sue the tenant.

The landlord should show the tenant these costs, but if the information is not given, the tenant should seek legal advice as to the best available remedy.

There is no standard government issued lease. The contents of a lease are up to the landlord and the tenant to negotiate. Landlords and tenants may wish to seek legal advice.

LANDLORD AND TENANT RESPONSIBILITIES

It depends on what the lease says. If the issue is not addressed in the lease, then the tenant is likely responsible, because landlords are generally only responsible for maintaining the structural elements of the building, including the roof and walls.

It depends on what the lease says. If the issue is not addressed in the lease, the tenant is generally responsible. If the service has been provided in the past but has recently been discontinued, the tenant may want to seek legal advice.

When there is no lease, the tenant is generally responsible for maintenance/repair of the rental unit, with the exception of the building’s structure (walls and roof). In this situation, the tenant can either try to persuade the landlord to make repairs, take care of the problem themselves, or end the tenancy.

EVICTIONS

A landlord may choose to hire a bailiff for assistance; they are private companies and are generally listed in the Yellow Pages.

A breach of the lease by a tenant may be grounds to evict. The landlord should consult a lawyer or apply to the Superior Count of Justice to have a judge decide if the tenant has breached the lease, and if so, to have the lease terminated and the tenant evicted.

The landlord must serve a notice of forfeiture and a reasonable amount of time must be provided for the tenant to vacate the unit.

It depends upon the facts. If there is any question about whether the tenancy is residential or commercial, the Landlord and Tenant Board will hold a hearing and make a decision. Either the landlord or the tenant may apply to the Board. The Board can be reached at: 416.645.8080 or 1.888.332.3234. At the hearing, the Board will consider the terms of the lease as well as look at all the circumstances. For example, despite what is in the lease, the landlord may have consented to a residential arrangement or encouraged the tenant to use the premises for residential purposes. If so, the landlord may be bound by the provisions of the Residential Tenancies Act, 2006. However, a tenant may be living in a commercial space with a commercial lease in contravention of the terms of the lease or in contravention of city by-laws or other applicable laws, without the landlord’s knowledge or consent. In this case, the landlord would likely be able to pursue the remedies available under the Commercial Tenancies Act or applicable common law.

If a tenant is breaking the rules of the lease, the landlord can serve a notice of forfeiture demanding that the illegal activities stop. The length of time for the tenant to fix the problem should be based on the seriousness of the breach: immediate eviction may be appropriate for serious problems. Landlords may apply to the Superior Court of Justice for an order ending the tenancy, and a “writ of possession” to evict the tenant. If the lease does not prohibit illegal activities then the landlord may have no recourse, except for informing the police. Landlords should talk to a lawyer to evaluate their options.

RENT AND DEPOSITS

The Commercial Tenancies Act does not have rules about last month’s rent or security deposits; it is up to the landlord and tenant to negotiate. The amount of a security deposit can exceed the amount of one month’s rent.

No, unless the landlord agrees to it, or it was allowed under the terms of the lease, the deposit can only be used for its specified purpose, and the tenant is still expected to pay rent. Usually landlords require a security deposit that is returned when the tenant vacates the unit.

No, the tenant can give proper notice that he/she intends to leave, and pay the original rent for the final month.

TENANTS MOVING OUT

Fixtures that are attached to the unit, regardless of who installed them, must stay with the property unless there is an agreement otherwise. Items of personal property that are movable can generally be removed from the property. If there is a dispute, it can be resolved in Small Claims Court for items worth $25,000 or less and in the Superior Court of Justice for amounts that exceed $25,000. Fixtures are not detailed in the Commercial Tenancies Act. Whether items are fixtures and how they are to be dealt with have been established through the courts. Each case must be decided on its own merits. Legal advice should be sought.

Unless the lease states otherwise, a tenant is generally required to leave the rented premises in the same condition as when they moved in, minus reasonable “wear-and-tear”. If a tenant renovates a unit according to a requirement in the lease or with permission of the landlord, they will usually be able to leave the premises in the renovated condition, as long as there is no unreasonable damage to the property. In general, fixtures installed by the tenant become the property of the landlord. However, if the lease stipulates that a tenant must remove fixtures, the tenant is usually responsible for ensuring that any damage due to installation or removal is repaired. If the tenant damages the property, leaves the premises in a condition that causes the landlord a financial loss, or does not comply with the terms of the lease, the landlord may be able to sue the tenant.

There is no legislation that deals with abandoned property. Generally, if the property is of no value, then it may be acceptable for the landlord to dispose of it. If the property has value, the landlord should make all reasonable attempts to inform the tenant that it should be retrieved. If the landlord throws it away or sells it too soon, the landlord may be at risk of being sued by the tenant. Landlords may wish to consult a lawyer for advice.

OTHER

The law provides that the responsibility rests on both the landlord and the tenant. The lease may provide some guidance in this respect but legal advice should be sought.

No, the landlord does not have a right to a key or to enter the rental unit unless the tenant agrees to it or the lease has addressed this issue. The police or fire department will force entry in cases of emergency.

No, unless the tenant agrees to it or the lease has addressed this issue.

No. The Repair and Storage Liens Act does. It allows storage providers to seize personal property for non-payment. For information on the Act you can call 1-800-268-1142.

No, the Retail Business Holidays Act takes precedence over a lease.

No, this would put a tenant in a position to be evicted. A tenant may apply to court if a landlord fails to meet obligations.

Yes, if a landlord is registered for GST, the landlord can collect GST from the tenant. Even if the lease does not stipulate that the tenant must pay GST, the landlord can ask the tenant to pay it. For more information on GST requirements you can contact the GST Information Line of the Canada Customs and Revenue Agency toll-free at 1-800-959-5525.

The provincial government does not intervene in commercial landlord and tenant disputes.

(Visited 1,078 times, 9 visits today)