When a landlord leases commercial space to a tenant, the landlord is legally bound by several rules and obligations throughout the term of the lease. Learn the details of a commercial landlord’s obligations to you throughout the term of your lease.
The landlord’s obligations in a commercial lease
A landlord who provides a tenant with a rental property must maintain the premises in good working order. He must inform the latter about the risks involved, if any (soil pollution, disasters suffered, technological risks, natural risks …).
- According to article 1854 of the Civil Code of Quebec, “the lessor is bound to deliver the leased property to the lessee in a good state of repair of all kinds and to provide the lessee with peaceful enjoyment of the property for the entire duration of the lease”. This means that the tenant can use the leased premises with confidence and peace of mind.
- During the course of the lease, the landlord must make necessary repairs to the property, except for minor maintenance repairs, which are the responsibility of the tenant, unless they are caused by the age of the property.
- The same section specifies that the landlord must guarantee to the tenant that the leased property can be used for the purpose for which it is leased throughout the lease. On the other hand, it is considered that, in the case of a commercial lease, these provisions may vary since the parties have the possibility to stipulate otherwise.
- Unless the municipality concerned advises otherwise, the landlord must assure the tenant that the zoning guidelines permit the tenant’s intended use (specified in the commercial lease).
The different types of commercial leases
There are different types of commercial leases: gross (or net) lease, double net lease or triple net lease as well as the proportional rent lease. These contracts differ depending on the expenses that will be covered by the tenant.
The content of the commercial lease determines the obligations of each party, but it can always be negotiated. The advice of a commercial lease lawyer allows you to choose the type of lease that best suits your situation.
A gross lease: when the tenant pays a (pre-arranged) rent that includes all expenses, even if the landlord’s expenses increase.
A net lease: when the tenant pays a base rent plus an additional rent (often in proportion to the space occupied), which correspond to certain charges such as school and property taxes.
A double net lease: when the tenant assumes a portion of the building’s insurance (corresponding to the leased area) in addition to paying a portion of the property taxes.
A triple net lease: when the landlord sends all tenants a bill (monthly or annually) to cover building expenses. This may include property taxes, roof repairs, snow removal, window washing… The amount charged may vary depending on the area occupied by each tenant. However, this must have been provided for in the lease.
A proportionate rent lease: when a tenant pays rent (as set out in the lease) but in addition remits to the landlord a percentage of the gross revenue of the business operated in the leased premises. This type of arrangement is common in leasing space in a shopping center.
What should a commercial lease contract contain?
To be compliant, a commercial lease agreement must mention the following elements:
- Type of lease
- The planned way of its renewal
- Rules regarding rent increases
- The amount required on deposit (if any)
- Repairs to be made by the landlord
- The work taken in charge by the tenant, if any
- Obligations relating to repairs and/or maintenance.
Note: as for the duration of a commercial lease, it varies according to several factors. For example, depending on the planned investment to fit out the leased premises to make the tenant’s activities possible.
The interest of calling upon a lawyer specialized in commercial leases
In the province of Quebec, commercial leases are not subject to the same rules as residential leases. The parties may, after negotiation, agree to terms and conditions different from those provided for in the CCQ (Commission de la construction du Québec).
It is not uncommon, for example, for the tenant to agree to take charge of certain work on the building concerned. Hence the importance of ensuring that the content of the commercial lease mentions these details. It is strongly recommended to have the clauses of the contract verified by a commercial lease lawyer. He will be able to analyze the document and redo it if necessary. This real estate law professional has all the experience required to answer different real estate questions (latent defect, subletting, lease transfer…).
NOTE: This article does not constitute legal advice or the opinion of a commercial lease lawyer. Rather, it is provided solely to inform readers of certain aspects surrounding the rights, powers and responsibilities of a commercial landlord in Quebec.