To assign a commercial lease to a new buyer in Ontario, you must obtain the landlord’s formal written consent. Even after the lease is assigned, the original business owner (Assignor) remains legally and financially responsible if the new buyer fails to pay the rent, unless a formal “Release” is successfully negotiated with the landlord.
Selling your business in Ottawa is a massive achievement 🎉. Whether you are handing over a bustling café in Centretown or a thriving dental clinic in Kanata, the sale almost always hinges on transferring your commercial lease to the new buyer. This process is known legally as an “Assignment of Lease.” Many business owners mistakenly believe that once they sell their corporation and hand over the keys, they are completely free from the property. In commercial real estate, this is a dangerous assumption.
Under the Ontario Commercial Tenancies Act, assigning a lease involves a three-party dance between you, the buyer (Assignee), and the landlord. Your commercial lease document contains a dense “Assignment and Subletting” clause that strictly outlines what you must do. Landlords have a vested interest in ensuring the new buyer is financially secure before allowing them to take over the space. To navigate this complex legal transfer and avoid being sued for the new buyer’s future mistakes, you must hire a commercial real estate lawyer from our directory to manage the assignment.
Step-by-Step Process in Ottawa, Ontario
Transferring a lease is not a simple paperwork exercise; it is a formal legal application 📋. Here are the steps required to successfully assign your commercial lease in Ottawa.
Step 1: Review the Assignment Clause
As soon as you decide to sell your business, your lawyer must review the existing lease. They will check the “Assignment” section to see what conditions the landlord requires. Most leases state that the landlord’s consent “shall not be unreasonably withheld.” However, the lease will also list exactly what information you must provide to prove the new buyer is a worthy tenant.
Step 2: Compile the Buyer’s Financial Package
The landlord will treat the new buyer as if they were applying for a brand-new lease. You must work with the buyer to compile a comprehensive financial package 💼. This typically includes the buyer’s corporate financial statements, personal net worth statements, a detailed business plan, and previous business experience. The stronger the buyer looks on paper, the harder it is for the landlord to legally deny the assignment.
Step 3: Submit the Formal Request for Consent
Your lawyer will draft a formal “Request for Consent to Assign” and send it, along with the buyer’s financial package, to the landlord or their Ottawa property management firm. Under Ontario law, once a landlord receives a complete package, they have a reasonable amount of time (often defined in the lease as 15 to 30 days) to review it and issue their decision.
Step 4: Execute the Assignment and Assumption Agreement
If the landlord approves, all three parties must sign a legally binding “Assignment and Assumption Agreement.” The buyer agrees to take on all the rules, rent, and responsibilities of the lease. Crucially, your lawyer will attempt to negotiate a “Release” clause at this stage. A release formally absolves you from any future financial liability if the new buyer stops paying rent next year. Landlords hate granting releases, so aggressive negotiation is required.
How Much Does it Cost in Ottawa?
Assigning a commercial lease involves paying legal fees not only for your own lawyer but almost always for the landlord’s lawyer as well. Here is a breakdown of costs as of March 2026:
- Landlord’s Review Fees: Commercial leases invariably contain a clause forcing the outgoing tenant to pay the landlord’s administrative and legal costs for reviewing the assignment request. This typically costs $1,500 to $3,000 CAD, payable whether they approve the buyer or not.
- Tenant’s Lawyer Fees: Your own commercial lawyer will charge between $1,000 and $2,500 CAD to review the lease, compile the request, and negotiate the Release of Liability.
- Potential Security Deposit Increase: If the landlord feels the new buyer is slightly riskier than you, they may demand an increased security deposit (e.g., an extra 3 months’ rent) as a condition of granting their consent.
| Expense Type | Estimated Cost (CAD) | Who Pays? |
|---|---|---|
| Landlord’s Legal/Admin Fee | $1,500 – $3,000 | The Outgoing Tenant (Assignor) |
| Tenant’s Legal Representation | $1,000 – $2,500 | The Outgoing Tenant (Assignor) |
| Extra Security Deposit | Varies (1 to 3 months rent) | The New Buyer (Assignee) |
How Long Does the Process Take?
The lease assignment should be initiated the moment you accept an offer to sell your business. Gathering the buyer’s financial documents can take a week. Once submitted, the landlord typically has 15 to 30 days to review and respond, as dictated by the lease. From start to final signature, expect the entire assignment process to take 4 to 6 weeks. Do not close your business sale until this document is fully signed ⌛.
Frequently Asked Questions (FAQ)
Can the landlord just say no to the new buyer?
Only if they have a valid, commercially reasonable reason to do so. Under the Ontario Commercial Tenancies Act, if the lease says consent “shall not be unreasonably withheld,” the landlord cannot reject a buyer just because they want to. However, they can legally reject a buyer with terrible credit or no business experience.
What happens if the landlord refuses to grant me a Release of Liability?
If the landlord refuses to release you, you effectively become a guarantor for the new buyer. If the new buyer defaults on the rent two years from now, the landlord can sue you for the arrears. To protect yourself, your lawyer may ask the buyer to provide you with a personal indemnity agreement.
What is the difference between assigning and subletting?
In an Assignment, you transfer the entire lease to the buyer, and they pay the landlord directly. In a Sublease, you retain the primary lease, the new business pays rent to you, and you pay the landlord. When selling a business permanently, an Assignment is the proper and required method.
Can the landlord demand a cut of my business sale price?
Some aggressive commercial leases contain a “Profit on Assignment” clause. This means if the landlord believes the value of the lease is a major part of why your business is selling for a high price, they can demand a percentage of that profit in exchange for their consent. Your lawyer must check for this trap.
What if I sell the shares of my corporation instead of the assets?
Landlords are smart. Modern commercial leases contain a “Change of Control” clause. This means that if you sell the shares of your company to a new owner, it is legally treated as an Assignment of the lease, and you must still go through the formal landlord consent process.
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