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Commercial Lease

Understand commercial leases in Canadian real estate, how they work, what types exist, and what business owners and landlords must consider.

Commercial Lease

June 13, 2025


What is a Commercial Lease?

A commercial lease is a legally binding agreement between a landlord and a tenant for the rental of property used for business purposes, such as offices, retail, or industrial spaces.

Why Commercial Leases Matter in Real Estate

In Canadian real estate, commercial leases differ significantly from residential leases in terms of negotiation, customization, and legal complexity.



Common commercial lease types:
  • Gross lease: landlord pays most expenses
  • Net lease: tenant pays base rent plus some expenses
  • Triple net lease (NNN): tenant pays all operating costs



Commercial leases often involve longer terms, tenant improvements, and clauses for renewal, assignment, and termination.



Understanding commercial leases is critical for business owners, landlords, and investors managing risk, obligations, and occupancy rights.

Example of a Commercial Lease in Action

The business signs a five-year commercial lease with renewal options and tenant improvement allowances for their downtown retail store.

Key Takeaways

  • Used for leasing business and retail spaces
  • Often longer and more complex than residential leases
  • Includes various lease types with cost-sharing structures
  • Key for occupancy rights and investment planning
  • Requires legal review and negotiation

Related Terms

Additional Terms

Budgeting

Budgeting in real estate refers to the process of forecasting and managing income and expenses associated with owning, operating, or developing a property.. more

Tenant Improvements

Tenant improvements refer to custom modifications or build-outs made to a leased space to suit the tenant’s operational needs, often negotiated as. more

Highest and Best Use

Highest and best use refers to the reasonably probable use of a property that results in the highest value, provided it is legally permissible,. more

Gross Lease

A gross lease is a commercial lease where the tenant pays a fixed rent, and the landlord covers most or all operating expenses such as property. more

Brownfield

A brownfield is a property that was previously used for industrial or commercial purposes and is now vacant or underused, often requiring. more

Record of Site Condition (RSC)

A Record of Site Condition (RSC) is a formal document filed with a provincial environmental authority certifying that a property meets required. more

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