Published 11 September 2026 · By Jatin Dua, Broker of Record, RE/MAX Quantum Realty
The commercial section of the OREA guidelines runs past fifty clauses, but a commercial deal turns on six decisions: whether rent is gross or net and who wears the increases, how area is measured and what proportionate share means, how renewal rent gets set when the parties cannot agree, what consent a tenant needs to assign, who restores the premises at the end, and who does the work before the tenant moves in. Everything else attaches to one of those six. The costliest mistake is procedural: under LEASE/COMM-34 (Lease Form), the negotiated lease prevails over the offer.
Start here: the offer is not the lease, and the lease wins
I have watched more commercial deals unravel here than anywhere else. An agent negotiates hard on the agreement to lease, wins a free rent period, a cap on operating costs and a renewal at a set rate, and treats the file as closed. Six weeks later the landlord’s solicitor sends a forty-page standard lease saying something different, and the tenant’s lawyer is told the lease governs.
That is not sharp practice. It is what LEASE/COMM-34 (Lease Form) says. The landlord’s standard lease is attached as a schedule, the landlord agrees to alter it to reflect the business terms, and the tenant agrees to sign subject to adjustments negotiated between the two solicitors acting reasonably — with the lease prevailing where the two differ, save for manifest error.
LEASE/COMM-8 (Agreement to Sign Lease) is the tighter alternative where the form is settled: the parties execute the lease in the form attached and identified as a schedule. LEASE/COMM-24 (Entire Agreement) then shuts out collateral representations and anything the parties said but never wrote down.
Decision one: gross, net, or gross with escalations
LEASE/COMM-28 (Gross Lease) puts realty taxes, outside maintenance, building insurance and utilities on the landlord, inside the rate. LEASE/COMM-35 (Net Lease) reverses it: rent is net to the landlord and the tenant pays a proportionate share of operating and maintenance costs as additional rent, on an estimate trued up annually, with structural repairs and capital items carved out. LEASE/COMM-29 sits between, passing through increases above a base year.
Three things to confirm before quoting an all-in number. The additional rent figure in a net deal is an estimate, so a tenant budgeting on it has budgeted on a forecast. The carve-out for structural and capital items is not universal, and its absence is real exposure. And LEASE/COMM-25 (Escalation Clause for Property Taxes) passes through only tax and local improvement increases over a base year.
Do not forget LEASE/COMM-30 (HST – Lease), which records that HST is collectable on rent and on common area expenses. One line, and it prevents a common argument about whether a quoted rate was tax-inclusive.
| Structure | Clause | What the rate includes | Who wears increases |
|---|---|---|---|
| Gross | LEASE/COMM-28 | Taxes, outside maintenance, insurance, heat, hydro, water | Landlord, and the rate is priced for it |
| Gross with escalations | LEASE/COMM-29 | Tenant’s share of the listed costs to a base year | Tenant, above the base year |
| Net | LEASE/COMM-35 | Minimum rent only | Tenant in full, unless capital items are carved out |
| Gross plus tax escalation | LEASE/COMM-25 | All but increases in taxes and local improvement levies | Tenant, for tax increases only |
The short version
Never compare two commercial rates without knowing which structure each sits in and what the additional rent estimate is. A net rate and a gross rate are not the same currency.
Decision two: what area are you actually paying for
LEASE/COMM-11 (Area Defined) states an approximate rentable area with adjustment if the actual measurement differs, to current Building Owners and Managers Association standards. LEASE/COMM-12 (Area Measurement) handles the money: if the footage differs, the annual rate is adjusted accordingly.
Rentable and usable area are different numbers. BOMA standards produce a rentable figure including a share of common areas. A tenant pacing out a unit is measuring usable area, and they will pay on rentable. In a multi-tenant office building that gap is not small.
LEASE/COMM-42 (Proportionate Share) turns that number into money, defining the tenant’s share as their area divided by total rentable area — with a blank for how each figure is defined. Those blanks are the clause. A denominator using only leased area rather than the building’s total rentable area is worse for the tenant, because vacancy gets shared among the occupants. Get a certified measurement or a floor plate drawing before an offer carrying an area figure goes out.
Decision three: the renewal, and how rent gets set when nobody agrees
Every tenant wants a renewal option. Few understand that an option to renew at a rate to be negotiated is an option to have an argument. The guidelines solve that argument two ways.
LEASE/COMM-37 (Option to Renew – Appraisal) sets renewal rent at the then-current market rate for a similar location on similar terms, and sends it to appraisal if the parties have not agreed a month before expiry. One party designates an appraiser, the other has ten days to designate a second or the first becomes sole appraiser, the two appoint a third within ten days or either applies to a judge, and where there are three the two closest determinations are averaged.
LEASE/COMM-38 (Option to Renew – Arbitration) does the same job with a different resolver: where the renewal rent is still unsettled with two months left on the term, an arbitrator fixes the number instead of the parties.
Both require the tenant not to be in default and both require written notice a stated number of months before the term ends. Fill that blank generously, then put it in the tenant’s calendar the day the lease is signed. A missed renewal notice is the most avoidable disaster in commercial leasing.
One conflict to watch. LEASE/COMM-10 (Arbitration) sends all disputes under the contract to arbitration. Combine it carelessly with LEASE/COMM-37 and the lease says renewal rent goes to appraisal and also says every difference goes to arbitration.
The short version
Decide how renewal rent gets set before you decide what it will be. Appraisal under LEASE/COMM-37 and arbitration under LEASE/COMM-38 both work. An option at a rate to be agreed does not, and neither does either mechanism sitting next to a general arbitration clause that contradicts it.
Decision four: assignment, sublet, and the share sale nobody flagged
Most small business tenants eventually sell the business, and the buyer wants the location. If the lease does not permit that cleanly, the business is worth less than the owner thinks.
LEASE/COMM-13 (Assign or Sub-lease) requires the lease to permit assignment or subletting with landlord consent, not to be unreasonably withheld or delayed — then catches people. Consent bites a second way as well. Where the tenant is incorporated, a shift in who controls that company counts too, and the landlord has to approve it. A share sale is how most small businesses change hands. In all events the tenant remains on covenant.
LEASE/COMM-14 (Assignment – Approval by Landlord) is the notice-and-approval version. LEASE/COMM-15 (Assignment Without Approval) is the tenant-friendly outlier, permitting assignment to a related entity in which the tenant has a financial interest without consent, with the tenant still liable.
Behind it sits LEASE/COMM-31 (Guarantor), making the guarantor jointly and severally liable and letting the landlord proceed against them as if they were the named tenant. A client signing personally behind a corporation needs to know the guarantee does not simply evaporate on assignment; how far it follows them is for their lawyer. LEASE/COMM-3 (Condition – Financial Covenant of Tenant) is the landlord’s tool for checking a covenant.
Decision five: who restores the premises, and what it costs
This is the one tenants never price in, and it arrives as a five-figure bill at the end of a term. LEASE/COMM-45 (Restoring Premises to Original Condition) lets the tenant install fittings, fixtures and partitions with written approval, then requires the tenant, at the landlord’s option, to restore the premises at no cost to the landlord. The tenant pays to build it out and may pay again to tear it out.
The surrounding clauses set what the tenant may do: LEASE/COMM-9 (Alterations and Improvements), LEASE/COMM-40 and LEASE/COMM-41 (Partitions, with and without approval), LEASE/COMM-49 (Structural Penetration), LEASE/COMM-47 (Signs), and LEASE/COMM-19 (Contractors to be Used), which lets the landlord require its own trades at the tenant’s cost.
LEASE/COMM-20 (Demolition) ends a tenancy early: after a stated date, if the landlord undertakes demolition, the tenant vacates on stated notice, with leasehold improvement compensation calculated proportionately to the unexpired term. A tenant investing heavily late in a term may be compensated at a fraction of cost.
LEASE/COMM-51 (Work by Landlord) records the work the landlord will do before possession at no cost to the tenant. It is a blank clause, and “landlord to prepare premises” is not a description of work. LEASE/COMM-48 (Space Layout Sketch) gives the tenant three days from acceptance to deliver a layout of the area to be improved — a short fuse worth mentioning beforehand.
On free rent, the distinction between three clauses matters more than the number of months. LEASE/COMM-21 (Early Occupancy – Gross Rent Free) gives possession with no rent at all. LEASE/COMM-22 (Early Occupancy – Net Rent Free) abates minimum rent but leaves the tenant carrying its share of expenses. LEASE/COMM-43 (Rent Free Period) abates minimum rent for the opening months while additional rent runs from commencement. Both early occupancy clauses depend on the lease being executed and on evidence of insurance under LEASE/COMM-32.
The conditions, and the two that nobody can waive
Commercial conditions behave differently from the residential ones you are used to. LEASE/COMM-4 and LEASE/COMM-5 (Condition – Lawyer’s Approval, landlord and tenant) are ordinary benefit conditions, each waivable at the named party’s sole option by notice in time.
LEASE/COMM-1 and LEASE/COMM-2 (Condition – Approval from Board of Directors) are not. They are true conditions precedent and neither party may waive them. This is the Turney v. Zhilka territory most agents have heard of and few apply: where fulfilment depends on a third party’s act, the condition is not anyone’s to give up, and a purported waiver does nothing.
LEASE/COMM-7 (Condition – Zoning Satisfaction) and LEASE/COMM-6 (Condition – Occupancy Permit) are conditions subsequent. The deal proceeds unless the tenant gives notice of dissatisfaction or of inability to obtain the permit in time. Silence keeps the deal alive rather than killing it — the reverse of many residential conditions.
All of them turn on notice. In High Tower Homes Corp. v. Stevens, 2014 ONCA 911, as reported, a waiver delivered by fax where the agreement required personal delivery was ineffective. The notice clause governs.
The short version
Sort every condition into three buckets before advising anyone: waivable benefit conditions, conditions subsequent where silence means the deal proceeds, and true conditions precedent nobody can waive. Getting the bucket wrong is how a firm deal turns out not to be one.
Your exposure as the registrant
Commercial leasing carries a remuneration problem residential work mostly does not, starting with LEASE/COMM-27 (First Right of Refusal to Purchase). It contains a blank for a fee payable by the landlord to the named brokerage if the tenant exercises the right. You are writing a remuneration term into the agreement facilitating the transaction.
Two RECO requirements meet at that blank. Bulletin 6.2 sets the five components a remuneration clause needs: parties, purpose, amount and whether taxes are included, timing, and who pays and who receives. A bare figure meets none of them. Bulletin 3.1 requires disclosures to be distinct and separate from the agreement facilitating the transaction — not buried in a schedule.
Then the rule that ends conversations: brokerages must not agree with a self-represented seller to provide assistance or to charge or collect remuneration. Under Bulletin 2.4, confirm an unrepresented landlord intends to proceed that way, deliver and explain the RECO Information Guide and the self-represented party form, say plainly you act for your client, and make reasonable efforts to obtain written acknowledgement. Then do not advise them on price, terms or clauses.
Pull each of these clauses from your own OREA member copy before you use them, because the blanks are where your client’s money lives. The residential equivalents are in the rest of the clause series.
Questions agents actually ask
If the agreement to lease and the lease say different things, which one wins?
Under LEASE/COMM-34 the negotiated lease prevails over the offer where the two differ, save for manifest error. That is why the tenant’s lawyer needs the landlord’s standard lease form before acceptance rather than after. LEASE/COMM-8 is the tighter alternative: it requires the parties to execute the lease in the specific form attached and identified as a schedule, which leaves far less room for terms to move.
What is the difference between rentable area and usable area in a commercial lease?
Usable area is what the tenant occupies. Rentable area, measured to BOMA standards under LEASE/COMM-11, adds a share of building common areas, and rent is charged on rentable. A tenant who paces out the unit is measuring the smaller number. Get a certified measurement or a floor plate drawing with the demised unit outlined before an area figure goes into an offer.
Can a board of directors condition in a commercial offer be waived?
No. LEASE/COMM-1 and LEASE/COMM-2 are true conditions precedent and neither party is entitled to waive them, because fulfilment depends on a third party’s act rather than on either party’s satisfaction. Turney v. Zhilka is the leading authority on the point. If the approval does not arrive and the deadline passes, the offer ends, and a purported waiver does not revive it.
Does my tenant need landlord consent to sell the shares of the tenant corporation?
Under LEASE/COMM-13, yes. If the tenant is incorporated, the landlord’s approval is needed when control of that company moves, and the tenant stays on covenant afterward. A share sale is how most small businesses actually change hands, so a tenant who assumes a share transaction sidesteps the consent requirement is planning an exit that may not work. Raise it at the offer stage.
What does restoring the premises to original condition actually cost a tenant?
Potentially the cost of removing everything they installed. LEASE/COMM-45 makes restoration exercisable at the landlord’s option, at no cost to the landlord, on termination or renewal. A tenant who spends heavily on a build-out may have to pay again to take it out, and the choice belongs to the landlord. Price that into the deal rather than discovering it in the last month of the term.
Is there a remuneration issue with a first right of refusal to purchase?
There can be. LEASE/COMM-27 contains a blank for a fee payable to the brokerage if the tenant exercises the right, which makes it a remuneration term inside the agreement. Bulletin 6.2 requires five components — parties, purpose, amount and tax treatment, timing, and payer and recipient — and Bulletin 3.1 requires disclosures to be distinct and separate from the agreement rather than buried in a schedule.
The clause checklist I make my own agents use
A one-page pre-submission check for conditions and schedules — the dates, the notice route, and the eight things that get missed. Built for Ontario agents. Free, and there is no drip campaign behind it.
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Writing your first commercial deal alone?
Commercial leasing punishes agents who learned on residential paper, because the conditions behave differently and the lease outranks the offer. My agents get their schedules reviewed before they go out, and the commercial ones get read twice. If that is not how your office works, it is worth a conversation.
Book a 15-minute call or call or text 833-330-1925.
If the honest answer is that your current brokerage is fine, I will tell you that.
Related reading
- The Parking Clause: One Line That Prevents a Closing-Day Argument
- Designated vs Brokerage Representation: The Services Clauses That Define Your Agreement
- Property Tax Clauses in Ontario: Farm Tax, Local Improvements and the Holdback That Saves a Closing
- Chattels and Fixtures Clauses in Ontario: Good Working Order, Rentals and What Closes With the House
- The Fuel Tank Adjustment Clause: A Small Ontario Clause With a Predictable Argument
- Every clause and condition guide in one place
- OREA, Guidelines for Residential and Commercial Clauses, revised 19 May 2026 (OREA member resource)
- RECO Bulletin 6.2, Remuneration clause in an agreement of purchase and sale, 17 January 2024
- RECO Bulletin 3.1, Disclosure
- RECO Bulletin 2.4, Self-represented parties
- High Tower Homes Corp. v. Stevens, 2014 ONCA 911
- Turney v. Zhilka (Supreme Court of Canada, 1959)
- Trust in Real Estate Services Act, 2002 — Phase 2 in force 1 December 2023
Jatin Dua is Broker of Record and co-founder of RE/MAX Quantum Realty, Brokerage, Unit 101, 799 The Queensway, Etobicoke. Four-plus years in the GTA and more than $100M in sales volume. He reviews the agreements his agents write.
This is professional commentary from a Broker of Record on commercial drafting practice, not legal advice. Commercial leases are heavily negotiated documents and their interpretation and enforceability are matters for the parties’ own solicitors. This is general professional commentary from a Broker of Record on drafting practice. It is not legal advice, it is not a substitute for your own brokerage’s policies, and it does not create any professional relationship. Clause codes refer to OREA’s Guidelines for Residential and Commercial Clauses, an OREA member resource — the clause wording itself is OREA’s and is not reproduced here. Always work from your brokerage’s approved forms, and send your client to a lawyer for anything turning on interpretation, enforceability or remedy. Legislation, regulator guidance and case law all change; verify anything you are relying on.