A commercial lease is a long document and most of it will never matter to you. A handful of clauses will matter enormously. These are the ones worth reading twice.
Commercial tenants in Alberta have far fewer statutory protections than residential tenants. The Residential Tenancies Act does not apply. Whatever the lease says is broadly what governs, which means the document itself carries all the weight.
None of this is a substitute for having a lawyer review the lease. It is a guide to where to look and what to ask about.
Term and what happens at the end
Initial term
How long the lease runs. Five years is common for retail and industrial, though shorter terms exist for smaller units. A longer term gives you security and usually a better rate. It also commits you, so consider what your business looks like in year four before signing for five.
Renewal option
This is one of the most valuable clauses in any commercial lease and it is frequently overlooked. A renewal option gives you the right to extend at the end of the term. Check three things:
- Whether you have one at all. Without it, you have no right to stay past the term.
- How the renewal rate is set. Fixed, tied to an index, or at market rate. Market rate is common and reasonable, but understand it may mean a significant increase.
- The notice window. Options usually must be exercised in writing within a defined period, often six to twelve months before expiry. Miss the window and the option can lapse entirely. Put the date in a calendar the day you sign.
Holding over
What happens if you stay past the term without a renewal in place. Many leases specify a substantially increased rent for this period, often one and a half or two times base rent. Worth knowing before you find yourself relying on it.
Rent and escalation
Base rent is rarely flat across the term. Most leases build in scheduled increases, either fixed steps at defined intervals or increases tied to an index. Get the full schedule for the whole term, not just year one, and model it. A rate that looks affordable in year one can be uncomfortable by year five.
Separately, confirm whether the lease is net or gross, and what additional rent currently runs at.
Deposits and security
Commercial deposits are not regulated the way residential deposits are. Expect to provide the equivalent of first and last month’s rent, sometimes more. Check what triggers a deduction, what condition the space must be returned in, and when the deposit is repayable after the term ends.
Some landlords require a personal guarantee, particularly from newer businesses or numbered companies with limited history. A personal guarantee means you are personally liable for the obligations of the lease even if the business fails. It is common and often unavoidable, but it should be a conscious decision rather than something you notice afterwards.
Use clause
The use clause defines what you are permitted to do in the space. Narrow use clauses are common, and they matter in two situations.
First, if your business evolves. A clause permitting only a specific activity may not cover an adjacent one you add later. Second, if you want to assign the lease or sublet, a narrow use clause shrinks the pool of businesses that could take it over.
Where possible, negotiate language broad enough to cover reasonable evolution of the business.
Assignment and subletting
This is your exit route if circumstances change, and it is worth attention precisely because you hope never to need it.
Nearly every lease requires landlord consent to assign or sublet. The question is whether the lease says consent will not be unreasonably withheld. That phrase materially changes your position. Without it, consent can be refused for any reason at all, and you remain liable for the full term with no way out.
Repairs and maintenance
The lease will divide responsibility between landlord and tenant. Typically the landlord handles the structure, roof and common areas, while the tenant handles the interior of their premises. The boundary worth clarifying is building systems: heating, ventilation and air conditioning serving your unit specifically.
In many commercial leases the tenant is responsible for maintaining, and sometimes replacing, the HVAC unit serving their space. That is a meaningful cost. If the unit is already old at the start of the term, raise it during negotiation rather than discovering it in February.
Fixturing period and improvements
If the space needs work before you can open, ask about a fixturing period, which is rent-free time to complete improvements. Whether one is offered depends on the space and the term length, but it is a normal thing to ask for.
Also clarify what happens to your improvements at the end of the lease. Some leases require the space to be restored to its original condition, which can be an expensive obligation nobody thinks about until the term is ending.
A short checklist
- Term length, and whether there is a renewal option
- The exact notice window for exercising renewal, diarised on signing
- Full rent schedule for the whole term, including escalations
- Net or gross, and current additional rent
- Deposit amount, and whether a personal guarantee is required
- Use clause, and whether it accommodates the business changing
- Whether consent to assign will not be unreasonably withheld
- Who maintains and replaces the HVAC serving your unit
- Restoration obligations at the end of the term
This is general information about how commercial leases are commonly structured in Alberta, not legal advice. Commercial tenants are not covered by the Residential Tenancies Act. Have a lawyer review any commercial lease before signing.
The underlying point
Most of what causes problems in commercial tenancies is not a landlord behaving badly. It is a tenant who signed without understanding what they agreed to, and a landlord who assumed they had. Asking about these clauses before signing is normal and expected, and a landlord who is not comfortable answering them is telling you something useful.
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