Four clauses of interest in a commercial lease

Since a commercial lease is not covered by the rules governing residential leases or by the Tribunal administratif du logement, its clauses constitute “the law between the parties”, unless they violate public policy rules. A broker representing the lessor or the lessee must therefore pay attention to the implications of certain clauses of the lease, and suggest that his client consult a lawyer if necessary.

Several clauses normally found in a lease can be the subject of negotiations involving the broker. They include:
 

• Area of the leased premises
  Care must be taken to clarify the method used to measure the leased premises, as several exist, for both the leased space and the common spaces. The markup factors assigned to common spaces should be specified to avoid disputes. The lessee may wish to limit the markup and require that the space be measured by an independent professional at the lessor’s expense.
   
• Restoration of leased premises
  Under article 1891 of the Civil Code of Québec, “Upon termination of the lease, the lessee is bound to remove all the constructions, works or plantations he has made (…).” This provision can be very costly for a lessee who has adapted a commercial space for his activities. The lessee could require not to be obligated to restore the premises to their original condition at the end of the lease. For his part the lessor could accede to this request and, depending on the nature of the leased premises, simply require that the lessee remove specific improvements that are detrimental to future leasing or that could represent significant costs for the lessor to remove.
   
• Permitted use of the leased premises
  Often left rather vague when it comes to office space, the description of the permitted use of leased commercial or industrial premises should be quite precise. It is also important to be informed of the existence of exclusivity clauses that may affect the immovable for the benefit of other tenants, as they could limit the use of the leased premises by the lessee. It is recommended to make sure that the permitted use specified on the lease will not limit the lessee’s future activities.
   
• Continuous operation of the premises
  The application of this clause can have serious consequences, as it requires a lessee to occupy the premises and maintain his activities there even in case of financial difficulties. A clear clause, specifying minimum activities and opening hours as well as the provisions applicable in the event of closure, will better guide the parties in the event of a dispute. It will be in the lessee’s interest to remove such a clause in order to retain flexibility in the event of a major setback. The lessor, however, has every interest in maintaining it, and may instead require the right to terminate the lease and impose penalties according to specified terms. It is important to note that jurisprudence has sometimes considered the cessation of activities as a change in use of the leased premises, which could constitute default, even in the absence of a continuous operation clause.

Recap

The drafting and negotiating of a commercial lease are complex tasks that require the expertise of several professionals, including lawyers. This said, a broker who is sensitive to the needs of his client and aware of the implications of the main clauses used can more effectively play his role as intermediary between the parties and bring the transaction to its successful conclusion.