Commercial vs. Residential Leases


Dear David,

In a previous article about snow removal, you mentioned that in a residential lease, snow clearing and grass cutting are the landlord’s responsibility. Does this apply to commercial leases?  Is a commercial landlord obligated to have a separate maintenance contract and offset these costs? – TAKING CARE OF BUSINESS

DEAR BUSINESS: If you have previous experience with residential leases and are comparing them to commercial rentals, you may assume the same principles apply. They do not. Residential and commercial rentals are very different.

The Residential Tenancies Act (RTA) of 2006 brought sweeping changes to the world of residential rentals, most notably by implementing a Standard Ontario Residential Lease Agreement. Landlords had previously been left to their own devices when drafting residential leases, and most operated under the assumption that if they wrote something down and both parties agreed to it, it was set in stone. The RTA created a common set of rules for things like postdated checks, additional deposits, snow clearing and grass cutting, and superseded other residential lease agreements.

Based on the RTA, an Ontario Court of Appeal case in 2009 decreed that landlords do not have the right to delegate snow clearing to residential tenants, regardless of what is written in the lease. The court decided that residential snow clearing was to be addressed in an entirely separate contract, and that the cost could not be rolled into the rent.

This decision has no affect on commercial leases. Commercial real estate is based in contract law, which means its lease stipulations are based on agreements made between landlords and tenants, and have endless variations. A single user commercial tenant could take full responsibility for exterior maintenance, while a landlord in a multi-tenant commercial building may manage snow removal and grass cutting, with tenants agreeing to pay their proportional share of the expenses.

In commercial real estate, landlords are rarely obligated to offset exterior maintenance costs for their tenants. You’ll often hear the term “triple net” in the commercial context, which means the tenant is responsible for all costs associated with the upkeep of the building, including grass cutting and snow removal. These obligations are set out in the lease and don’t require a separate document.

PRO TIP: Commercial and residential leases are very different, so don’t assume their policies are interchangeable. In a long-term commercial lease, assumptions can be costly, so you need to get it right. A trusted Realtor with rental experience can be a valuable asset. #Advice #AskDavid #TheNegotiator

David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Call or text today for your free home evaluation! 519-577-1212.