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A commercial lease is usually the longest and most expensive contract a small business signs. Alberta has a Commercial Tenancies Act, but the lease itself does most of the work, so the details are worth negotiating before signing.
Rent and additional costs
Many leases are net leases, where the tenant pays base rent plus its share of operating costs, property taxes and sometimes insurance. Ask how these additional charges are calculated, what is included and whether you can audit them.
Check how rent escalates over the term and how rent is reset on renewal.
Term, renewal and exit
Look at the length of the term, any renewal option and how it must be exercised, since missed notice dates are a classic problem. Understand what happens at the end: restoration obligations, removal of fixtures and any overholding rent.
If you may need to sell your business, the assignment and subletting clause matters. Landlords often require consent and can charge for it.
Guarantees and default
Landlords frequently ask owners for a personal guarantee. Negotiate limits on its size and duration where possible. Read what counts as a default, the notice and cure period and the landlord’s remedies, including its rights to take possession or recover rent.
Before you sign the offer to lease
- Get the landlord’s last three years of operating cost figures if the lease is net.
- Diarize the renewal notice date the day you sign.
- Ask for a cap on your personal guarantee and a date when it falls away.
- Confirm who pays for restoration and removal of fixtures at the end.