Most people have some experience with residential tenancy and renting, but few have experience with commercial leasing. The two could not be more different.
Residential tenancy is highly regulated and there are significant protections for the tenant. In addition, there is a residential tenancy board that the government has set up and designated to deal with disputes between landlords and tenants.
Commercial tenancies, on the other hand, have some statutory regulation but are primarily governed by the leases themselves. The Commercial Tenancies Act is not nearly as broad reaching as the Residential Tenancies Act, and most of its stipulations can be written out of a contract. It also doesn’t deal with many of the issues that commercial landlords and tenants face or may have to deal with in the lease.
As a result, the terms of a commercial lease are critical.
Both landlord and tenant should read and understand all of the terms that are in the lease prior to signing. Commercial leases can vary from two pages to 50 pages and may deal with many different aspects of the lease arrangement. The only term which is always in a commercial lease is the cost of rent; everything else depends on the landlord and tenant and how much detail they want to put into the lease.
It’s usually the landlord’s role to provide a lease and the tenant’s role to review and negotiate its terms. Tenants should not be afraid to discuss with the landlord all terms of the lease (not just price), nor should they be afraid to take charge of the drafting entirely.
Leases can appear to be the same with slight differences providing major benefits to the landlord or the tenant. Because of a perceived imbalance of power, tenants often accept the terms of a landlord’s lease without fully understanding the provisions or their rights. This is despite often being responsible for reimbursing the landlord for the cost of having the lease drafted as a term of the lease itself.
One of the most important clauses in a lease, and one that is often overlooked, is the dispute resolution mechanism, which will govern the resolution of any dispute between a commercial landlord and tenant. This could mean arbitration or court, which can be a costly and time-consuming process that can cripple a business.
Even the arbitration process, upon which many leases purport to rely, can lead to thousands of dollars in expenses and months or years of delay before a resolution is reached.