Fixed term lease
A lease is said to have a fixed term when the start and end dates are established and known. Thus a lease with a fixed term terminates by operation of law upon expiry of the term, without the need for a notice to that effect.1
A lease with a fixed term may be renewed. The renewal must be express, unless the lease is of an immovable, in which case the renewal may be tacit.2 A lease is renewed tacitly3 where the lessee continues to occupy the premises for more than ten days after the expiry of the term, without opposition from the lessor. The lease will be renewed with the same conditions for one year, including rent. If the term of the lease was less than one year, it will be renewed for the initial term.4
Lease extension or renewal?
There is sometimes confusion about the term “lease renewal” in commercial leasing brokerage. The renewal of a commercial lease legally implies a new lease resulting from negotiations between the parties, in which the terms and conditions may vary from the previous lease. A commercial lease whose term is extended without negotiation or changes in conditions is deemed to be a renewal resulting from a simple extension of the term. This is most often referred to as an extension of the lease.
This distinction is important for the broker, as it may have an impact on his remuneration. A broker can usually obtain remuneration for the renewal of a commercial lease, but rarely when a lease is simply renewed by means of an extension option.
CAUTION! Some clauses state that certain elements, such as rent, may be renegotiated without constituting a renewal of the lease.
Lease termination
However, if the lessor has manifested his intention to terminate the lease by bringing an eviction action,5 or has undertaken renewal negotiations, these actions show that he is opposed to renewing the lease. Regardless of its term, a lease can always be terminated by agreement between the parties.
A lessee who wishes to terminate his lease before the end of the term may do so under certain conditions negotiated in the lease. The lessor will most often require the lessee to pay a penalty, which usually includes the unamortized portion of the costs incurred by the lessor. The lessor also requires that the lessee who wishes to terminate the lease not be in default. This right is personal to him and cannot be transferred
The lessee may request to exercise a reduction right provided for in the lease, i.e. surrendering to the lessor a portion of the space occupied. The lessor could impose a penalty on the lessee who exercises this option. If the lessor accepts, he may lease the vacated space to a new lessee.
1 Art. 1877 C.C.Q.
2 Art. 1878 C.C.Q.
3 Art. 1879 (1) C.C.Q.
4 Art. 1879 (2) C.C.Q.
5 Art. 1889 C.C.Q.
