July, 2022

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Commercial Leases in Ontario

Disclaimer: This article on commercial leases is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

Moving from your garage (or kitchen table) to a storefront or office space is a significant step for any business.  That commercial lease tells the world that you are serious about your business and committed to its success. But commercial leases come with a price tag, both in terms of the monthly rent and the upfront costs associated with leasing commercial space.

Before signing a lease, it is important to understand the different types of commercial leases and what they entail. We believe that an informed tenant is a happy tenant. So, we have put together this article to help you understand the ins and outs of commercial leases.

In this article, we will discuss common terms in your lease agreement, how they differ from residential agreements and why you would be wise to have a lawyer review your agreement before you sign. If you want a legal team that is experienced in commercial leasing who are passionate about providing clear, strategic legal advice, contact our team today.

Common Terms and Provisions in Ontario Leases

There are no standardized lease forms for commercial real estate. Therefore, it is important to understand some of the common terms that you may see in your lease agreement.

The Commercial Tenancies Act in Ontario governs commercial leases and sets out the rights and responsibilities of landlords and tenants. It is important to note that a lease agreement may take precedence over the provisions of the Commercial Tenancies Act.

Generally,  a lease will cover  the following topics:

1) The term of the lease

This is the length of time that the tenant can occupy the space. It may be a fixed term or a periodic term. A periodic tenancy means that  the lease will automatically renew on a monthly or yearly basis, unless either the landlord or tenant gives notice to terminate the lease.

If the lease is for a fixed term, your lease may also address provisions for renewing your lease.

2) The rent

The amount of rent and when it is due. There may also be  provisions for how the rent will be increased over the term of the lease.

Commercial leases in Canada are usually fully net. This means that a tenant must pay basic rent as well as a percentage of the building’s realty taxes, insurance, utility and other maintenance expenses.

3) The use of the property

This will be specific to your business needs. For example, if you are leasing a retail space, the lease may indicate that the property can only be used for retail purposes.

4) The condition of the property

The landlord is responsible for ensuring that the property is in good repair and habitable, but the tenant is responsible for keeping the space clean and tidy.

5) The responsibilities of the landlord and  tenant

These will be specific to the property and the needs of the tenant. For example, the landlord may be responsible for maintaining the common areas, while the tenant may be responsible for snow removal.

6) The right to assign or sublet

This allows the tenant to rent out part or all of the space to another party. Assignment refers to the tenant renting the entire space to another party. Subletting refers to the tenant renting out part of the space to another party. The landlord’s consent is usually required for both assignment and subletting.

7) The right of first refusal

This gives the tenant the right to lease any additional space that becomes available in the same building.

  • ownership of any leasehold improvements; and
  • the provisions of any security/damage deposit.

8) Tenant improvements

This refers to any changes or improvements that the tenant makes to the property, such as adding partitions or painting walls. The landlord may require that the tenant remove these improvements at the end of the lease.

9) Security deposit

A security deposit is an amount of money that a tenant gives to a landlord as security for damages or missed  rent. 

10) Common areas

Common areas are areas of a building that are shared by all tenants, such as hallways, washrooms, and elevators.

11) Operating expenses

These are the costs of running and maintaining the property, such as utilities, janitorial services, and snow removal. In a commercial  lease, these expenses are usually the responsibility of the tenant.

12) Insurance

The landlord is responsible for insuring the property, but the tenant may be required to insure their own contents and business operations.

13) Notice provisions for terminating the tenancy

These provisions outline the notice period that either the landlord or tenant must give  when they want to terminate the lease.

14) Default provisions

These are the consequences that a tenant will face if they default on the terms of the lease, such as failing to pay rent on time.

15) Quiet enjoyment

The tenant has the right to quiet enjoyment of the property, which means that the landlord cannot evict the tenant without cause or interfere with the tenant’s use and enjoyment of the property. Likewise, other tenants have the same right   and should not be disturbed by the actions of any one tenant.

16) Dispute resolution

This provision outlines how disputes between the landlord and tenant will be resolved,  such as through arbitration or mediation.

There are other provisions  that may be included in a commercial lease, but these are some of the most common.

Differences Between Residential and Commercial Leases

You may be more familiar with residential rental agreements and believe that the same rules apply to both.  However, there are some important differences between commercial and residential leases that you should be aware of before signing a lease agreement.

Learn the in and outs of commercial leases! In this article we will also discuss some come terms in your lease agreement.

One main difference is in how the courts will view disputes . In a residential lease, the courts will usually give more deference to the tenant. This is because tenants are often seen as being at a disadvantage when negotiating with landlords. However, in a commercial lease, the courts will typically treat both parties equally.

As both the tenant and landlord are knowledgeable business people, the courts will view the dispute through the lens that both parties should have had the lease reviewed by independent legal counsel and negotiated the terms to their liking.

Another difference is that there is no legislation that addresses rent increases  in commercial leases.  In contrast, residential tenancy law often sets out rules around how much and how often landlords can increase rent. As a result, landlords have more flexibility when it comes to setting rent prices in commercial leases.

Expert Legal Advice For Commercial Leases in Ontario

Now that you understand the basics of commercial leases, you may be ready to sign a lease agreement.  As with any legal contract, it’s important to have an experienced lawyer review the agreement before you sign.

As we noted, the courts will  not give as much deference to either party in a commercial lease dispute. This means that it’s even more important to ensure that the agreement clearly sets out the rights and obligations of both parties.

For expert legal advice on your Ontario lease agreement, contact our team of experienced real estate lawyers today.   We take the time to discuss what is important to you  and ensure that the agreement protects your interests. 

Because our team practices both sides of real estate law – the transactional (aka preparing contracts) and the litigation (aka handling disputes and bringing forward actions) – we are uniquely positioned to provide you with the best legal advice. We use our litigation experience to see problems before they arise –  and craft creative solutions to solve them.

We understand that your business is important to you and will take the time to ensure that your commercial lease agreement meets your needs. Start by contacting us today.

So you’ve been asked to be an executor…

Disclaimer: This article about the executor’s duties in Ontario is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

So you’ve been asked to be an executor…now what?

If someone has asked you to be their executor, it’s likely because the person who has named you in their will trusts you to carry out their final wishes. While it may be an honor to be chosen, an executor’s duties in Ontario come with a lot of responsibility.

We want you to go into the role knowing what to expect, so in this article, we will outline what is expected of you as an executor, answer some frequently asked questions and help you guide this very important decision.

As with any legal matter, it’s important to talk to a knowledgeable estate lawyer  to ensure you understand all the complexities and your rights and responsibilities as an executor. Book a call with our team today.

First though, what is an executor?

What is an executor?

An executor is the person that someone appoints in a will to carry out their instructions once they have passed on. This includes managing any assets, paying debts and distributing any remaining property according to the wishes of the deceased, as outlined  in the will.

The executor has many responsibilities and must act in the best interest of the estate and the beneficiaries.

Can an executor also be a beneficiary?

Yes, the executor can also be a beneficiary of the estate.

What are an executor’s duties in Ontario?

The executor’s duties in Ontario include being able to execute, or carry out, the wishes of the deceased as set out in their will.

Specifically, this  includes:

– Gathering and inventorying the assets of the estate

– Paying any debts and taxes owed by the deceased

– Distribute the remaining assets to the beneficiaries

The executor has a legal duty to act in the best interest of the estate and the beneficiaries. 

What should I keep in mind if I’m asked to be an executor?

Sometimes, we are so eager to help our loved ones that we say yes to being an executor without really thinking it through. But being an executor is a big responsibility and it’s important to make sure you are up for the task before you agree.

Consider these factors:

– Do you live close to the deceased? If not, it may be difficult to manage the estate from a distance.

– Do you have the time? Executors are often also working full-time and taking care of their own families. If you don’t think you can commit the time, it’s best to say no.

– Are you organized and detail oriented? This is a must. When you handle someone’s estate, there is a lot of paperwork.

– Do you get along with the beneficiaries? If there is already tension among the beneficiaries, it may be best to bow out gracefully.

– Are you up for the challenge? Being an executor can be emotionally and mentally challenging, as well as time-consuming. Make sure you are prepared for the journey ahead.

It is important to note that this is not a short-term commitment. On average, it takes about 3 years for the estate to close. So , if you’re not prepared for the long haul, it’s best to say no.

As well, you will need to loan the estate for such expenses as the funeral and any probate taxes. You can be found personally liable to the estate’s creditors. This could be a substantial amount of money, so make sure you are financially prepared for this possibility.

If you are preparing your own estate plan, there are ways to lessen this burden on your executor. For example, some people opt to have a Tax-Free Savings Account (TFSA) with funds specifically earmarked for this purpose, or will prepay for their funeral arrangements.

What should I do if someone appoints me their executor?

First, you will want to speak to a lawyer.  They can help you understand the role of executor and your responsibilities.

Then, you should take some time to read the will and make sure you understand the wishes of the deceased. If there is anything you’re unsure about, ask the lawyer for clarification.

Once you have a good understanding of what is expected of you, you and your lawyer will determine if you need to apply for probate. Most estates require this step.

Your lawyer can help you with the probate application and guide you through the process.  You will then need to  notify the beneficiaries of the estate and provide them with a copy of the will.

After that, you can begin to gather the assets and start paying any debts or taxes owing.  You’ll want to be sure that you capture all creditors and will even want to advertise in a local paper for three weeks. 

Once all debts have been paid, you can begin distributing the asseets to the beneficiaries. You will likely opt to hold some funds back to pay any taxes or  debts that may arise after the distribution has been made.

You will also need to prepare and file tax returns for the deceased as well as the estate. Once all of that is cared for, you can distribute the remaining assets to the beneficiaries.

Throughout this process, you will need to keep accurate accounting records showing  all income, expenses and distributions made. These records will need to be provided to the beneficiaries upon request.

Handling a Weighty Responsibility

The role of executor can be complex and time-consuming. But it is also an important role that comes with a great deal of responsibility. If you have been named as an executor, make sure you understand what is expected of you.

Of course, any task is easier when you have the proper support.  And that’s where we come in. We are here to help you through the process and make things as easy as possible.

So, if you have been named executor, give us a call. We can help you understand your role and responsibilities and provide you with the support you need to get the job done right.

Real Estate Market Changes in Ontario

Disclaimer: This article on the GTA real estate market is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

In Ontario, especially in the GTA, we have seen the housing market cool recently. For example, the Toronto Regional Real Estate Board (TRREB), reported that the average home price for the region costs $121,738 less than it did at the February price peak, a 9.1% drop.

This is good news for potential first-time buyers who have been waiting for prices to cool off before jumping in. It’s also good news for people who are looking to downsize or move to a more affordable neighbourhood.

However, for those that put in unconditional offers months ago, they may be caught in a precarious situation.

This article will outline the issue many buyers are facing, and how it can be addressed.

Regardless if you are a buyer or seller affected by this recent cooldown, the most important thing that you can do is have a real estate lawyer that you can trust. You need a strategic advocate to help you navigate this tricky situation. Look for someone with the credentials and competency to help you achieve the best result possible, like the team at Beeksma Law.

The Problem: The appraisal value is lower than the offer.

When the market peaked, bidding wars were common and high offers were common. However, as the market slides, the property’s value is no longer reflective of the offer.

This means that those trying to obtain a mortgage may find themselves in a position where their financing is at risk. Their lender may now be unwilling to provide the same level of financing, as they are only willing to loan money based on the appraised value of the home.

This can present a major problem for buyers who have put in an offer that is well above the appraised value. Since offers were being submitted without conditions, these buyers may find themselves in a difficult financial situation.

In fact, we recently had a case where we acted for the sellers and the buyers found out shortly before closing that they were short $95,000. That is a significant amount of money to come up with on such short notice.

What can you do as a Buyer?

If you are in this situation, the first thing that you need to do is reach out to your lawyer and discuss your options.

One thing you should definitely not do: Don’t ask for an extreme abatement (or price reduction) that is inconsistent with the reason you’re asking for it. This will likely not be successful and is a surefire way to sour any future negotiations.

For example, a colleague told me of a situation recently where a buyer asked for a $100,000 abatement. The reason they gave? Their home inspector found water damage on some of the ceiling tiles – a pretty weak argument.

So what can you do? Honestly, once it’s a firm deal, your options are limited. You’re legally obligated to purchase the property on the closing date on the terms agreed upon. The best you can do is try to work something out with the sellers. That may be in the form of an abatement or a delayed closing. See if the vendor will agree to a short extension (for example, a week) to give you time to secure additional funding.

Remember, a seller has no legal obligation to agree to an extension. However, with a falling market, they may agree to a short one.

The most important thing here is to be upfront, negotiate in good faith and be honest.

Avoiding this scenario

If you are currently looking to buy a house and want to avoid this scenario, there are two things that you can do:

  1. Include a financing condition with your offer. This will protect you in the event that your financing falls through and you are unable to obtain a mortgage. Make sure that you have a realistic understanding of the market value of the property. This way, you can avoid overpaying for a property and find yourself in a difficult financial situation. If you’re not sure what a fair price is, speak with your realtor.
  2. Make sure you have sufficient funds to cover any shortfall. If you are buying a property and worry that the appraised value may come in below the agreed-upon purchase price, make sure you have enough funds to cover the difference. This way, if the financing does fall through, you will still be able to close on the property.

Finding the right legal counsel when troubles arise

Situations like this make it even more important to have an experienced and strategic lawyer on your side (such as the lawyers here at Beeksma Law) to effectively and strategically come to a resolution.

There’s a significant benefit when your real estate transactional lawyer is also a real estate litigation lawyer. You get an advocate who knows how to persuade the other side to cooperate or protect you in the unlikely event of a lawsuit.

Simply put, you don’t want the cheapest lawyer that you can find, especially as the market changes. You really do get what you pay for. Instead, you want a team that is known for their expertise, experience and professionalism.

When it comes to finding a lawyer for your real estate transaction, do your research and ask around for referrals. If you’re looking for a top-notch team of real estate lawyers in Ontario, we invite you to contact us. We would be happy to chat about your transaction.