The one lease clause that can
kill your business sale.

By Jonathan Kleiman, Barrister & Solicitor · Published June 2026

The short version: most buyers of a location-dependent business need your premises, which means they need your commercial lease. Whether the lease can be transferred to them turns on the assignment clause. Ontario law gives tenants a default protection — consent "not to be unreasonably withheld" under the Commercial Tenancies Act — but landlord leases routinely override it, handing the landlord a veto over your sale. The fix is to negotiate that clause before you sign (or at renewal), and to read it early if you are thinking of selling.

I have watched promising business sales slow to a crawl, lose value, or collapse over a single provision most owners never read closely: how the lease can be assigned. It is an easy clause to ignore when you sign — you are focused on rent and term, and selling the business is years away. But for a restaurant, clinic, retail shop, or any business whose value is tied to its location, the assignment clause can quietly become the most important sentence in the entire lease. This guide explains why, what the law actually says, and how to keep your landlord from sitting in the middle of your deal. As always, your lease is the document that governs, and none of this is legal advice for your specific situation.

Why your lease can make or break a business sale

When someone buys your business, a large part of what they are paying for is often the location — the foot traffic, the build-out you invested in, the goodwill attached to the address. To get that, the buyer has to step into your lease. How they do it depends on how the deal is structured:

• Asset sale. The buyer purchases the business's assets, and the lease must be assigned from you to them. Assignment almost always requires the landlord's consent under the lease.
• Share sale. The buyer purchases the shares of your corporation. The corporation stays the tenant, so on its face the lease does not move — but many leases treat a change of control of the tenant as a deemed assignment that also needs consent.

Either way, the landlord can end up holding a gate your deal has to pass through. If the lease lets the landlord refuse consent, or terminate instead of consenting, or attach expensive conditions, then your buyer's access to the premises — and therefore your sale — is in the landlord's hands. That is the power the assignment clause gives away, and most owners never notice it until a buyer is at the table.

The default rule: consent "not to be unreasonably withheld"

Here is the good news, and the Ontario starting point. Under section 23 of the Commercial Tenancies Act, where a lease prohibits assigning or subletting without the landlord's consent, that consent is deemed not to be unreasonably withheld — unless the lease expressly provides otherwise. In other words, the law's default is that a landlord cannot just say "no" for any reason it likes.

What counts as reasonable? Broadly, the landlord is limited to assessing the proposed new tenant's fitness — their financial strength and their business experience and practices. A landlord is acting reasonably if it withholds consent because the buyer is a poor financial covenant or plainly cannot run the business. A landlord is not acting reasonably if it refuses for a collateral or opportunistic purpose — to force a higher rent, to insert a demolition clause, to recapture the space for itself, or to extract some other advantage unrelated to the assignee's suitability. If a landlord withholds consent unreasonably, the tenant can apply to the Superior Court of Justice for an order permitting the assignment.

…but the lease usually overrides the default — the clauses that bite

Now the catch, and it is a big one. The section 23 protection applies only if the lease does not contract out of it. And landlord-drafted leases very often do. These are the clauses that turn a manageable consent requirement into a genuine threat to your sale:

• "Sole and absolute discretion." If consent may be withheld in the landlord's "sole and absolute discretion," the reasonable-consent protection can be displaced entirely — the landlord can say no for almost any reason. This is the single most dangerous wording to find in your assignment clause.
• Absolute prohibition. Some leases bar assignment outright, with no consent mechanism at all. Rare, but fatal to a clean sale if it is there.
• Landlord recapture / termination right. Instead of consenting, the lease may let the landlord terminate the lease when you ask to assign — taking the space (and its value) back rather than letting you sell it. This quietly converts your request to sell into the landlord's opportunity to evict.
• Change-of-control trigger. A clause deeming a share sale or change of control a deemed assignment means even a share deal needs consent — so structuring the sale as shares does not dodge the problem.
• Profit-sharing on assignment. Some leases require the tenant to hand the landlord part of any gain realized on an assignment, taxing your exit.
• Continuing liability and surviving guarantees. Many leases keep the original tenant — and any personal guarantor — on the hook after assignment, so you can remain liable for a buyer who later defaults.

The lesson is simple: do not assume you have the section 23 protection. Read the clause — ideally as part of a full commercial lease review before you sign. The difference between "consent not to be unreasonably withheld" and "consent in the landlord's sole and absolute discretion" is the difference between a sale you control and a sale your landlord controls.

Asset sale or share sale — does it change the lease problem?

Owners often hope that selling shares instead of assets sidesteps the lease entirely. Sometimes it helps; often it does not. In a share sale the corporate tenant is unchanged, so absent special wording there is no assignment to consent to. But as noted above, a well-drafted commercial lease usually includes a change-of-control provision that deems a transfer of the tenant's shares to be an assignment requiring consent — precisely to stop owners from using a share sale to route around the landlord. So whether the share route helps depends entirely on your lease's wording.

This is one more reason the asset-versus-share decision should never be made on tax considerations alone. The structure interacts with your lease, your contracts, and your liabilities all at once — I walk through the broader trade-off in asset purchase versus share purchase in Ontario. When premises matter to the business, the lease's assignment and change-of-control language belongs near the top of that analysis, not the bottom.

How to negotiate the clause before you sign (or at renewal)

The cheapest time to fix the assignment clause is before you sign the lease, and the second-cheapest is at renewal, when you have leverage and the landlord's attention. These are the moves I prioritize for a tenant who might one day sell:

• Replace "sole and absolute discretion" with "not to be unreasonably withheld." Pull the clause back to (or below) the statutory default. This is the most important single change.
• Define what "reasonable" means. Spell out that consent turns on the assignee's financial and business fitness and nothing else, so the landlord cannot stretch "reasonable."
• Add a permitted-transfer carve-out. Negotiate the right to assign — without full consent, or on consent that cannot be withheld — on a bona fide sale of all or substantially all of the business, and to affiliates for reorganizations.
• Remove or cap the recapture right. Do not let the landlord terminate instead of consenting; if it stays, limit it tightly.
• Cap consent fees and costs. Agree a reasonable, fixed fee and a cap on the landlord's legal costs, so consent cannot be priced like a toll.
• Get a release on a qualifying assignment. Negotiate a full release of the tenant — and any personal guarantor — when you assign on a genuine sale, so you are not liable for the buyer forever.
• Fix the change-of-control language. Carve out a good-faith sale of the business so a share deal is treated fairly rather than as a trap.

If you're already selling and the clause is bad

Sometimes the lease is already signed and the buyer is already at the table. You still have moves:

• Engage the landlord early and professionally. Do not spring the assignment on them at closing. Approach early, frame it as keeping a paying tenant in place, and make consent easy to say yes to.
• Present a strong assignee package. Give the landlord exactly what a reasonable one needs — the buyer's financials, business background, references, and intended use — so a refusal would look unreasonable.
• Use section 23 if it applies. If the reasonable-consent standard governs your lease and the landlord is stalling for a collateral reason, the prospect of a Superior Court application can be real leverage — though litigation is slow and a live deal rarely waits.
• Consider a sublease as a fallback. Where assignment is blocked, a sublease (if the lease permits it) can sometimes get the buyer into the space, albeit with you still in the chain and still exposed.
• Bring in a lawyer immediately. The order in which you approach the landlord, and how the request is framed and documented, materially affects the outcome.

Negotiation arguments that actually work on landlords

When you are asking a landlord to consent, the framing matters. A few arguments I find land:

• "You keep a paying tenant, not a vacancy." Consenting means continued rent from a vetted buyer; refusing risks an empty unit and the cost of re-leasing. Make the landlord's own economics the reason to say yes.
• "The buyer is as strong as — or stronger than — I am." Lead with the assignee's financial covenant and experience. If the new tenant is a better risk, a reasonable landlord has little ground to refuse.
• "This is exactly what section 23 contemplates." Where the reasonable-consent standard applies, a polite reminder that consent cannot be unreasonably withheld, and that a refusal for collateral reasons is reviewable by the court, reframes the conversation.
• "Let's solve your real concern." If the landlord's worry is genuine — covenant strength, use, restoration — address it with security, a guarantee from the buyer, or a tightened use clause, rather than treating the "no" as final.

When to bring in a lawyer

As early as possible — and well before you list the business or sign a letter of intent. A commercial lease lawyer can read your assignment and change-of-control clauses, tell you whether the section 23 protection actually applies to your lease, and shape your sale around what the lease allows — including whether to go asset or share, and how to approach the landlord. A business lawyer handling the sale can then make landlord consent a condition handled on your timeline rather than a last-minute crisis. Whether you are selling the business outright or simply keeping the option open, that lease review belongs at the start of the process. Reviewing the lease early is part of the same forward planning I describe in business exit planning: your lease is one of the assets you are really selling, so its terms should be sale-ready long before a buyer appears.

Key takeaways

• The assignment clause can gate your sale. Most buyers need your premises, so whether the lease can be transferred decides whether — and for how much — you can sell.
• Section 23 is a default, not a guarantee. The Commercial Tenancies Act deems consent "not to be unreasonably withheld," but only if the lease does not contract out of it.
• Watch for "sole and absolute discretion," recapture, and change-of-control clauses. These override your protection and can hand the landlord a veto — even on a share sale.
• Negotiate it up front or at renewal. Pull discretion back to reasonableness, add a sale carve-out, cap fees, and get a release of the tenant and guarantor on a genuine sale.
• Read the lease before you list. The assignment clause should be reviewed at the start of an exit, not discovered at closing.

Frequently asked questions

Can my landlord stop me from selling my business?

Not directly — but the assignment clause in your commercial lease can give the landlord a practical veto, because most buyers need your location and therefore need your lease. In an asset sale, the lease has to be assigned to the buyer, which usually requires the landlord's consent. In a share sale, the corporate tenant keeps the lease, but many leases treat a change of control of the tenant as a deemed assignment that also needs consent. Either way, if the landlord can refuse consent — or attach painful conditions — they sit in the middle of your deal. That is why the assignment clause is one of the most important provisions in the entire lease for any owner who might one day sell.

What does "consent not to be unreasonably withheld" mean?

It is the default protection in Ontario. Under section 23 of the Commercial Tenancies Act, where a lease prohibits assignment or subletting without the landlord's consent, that consent is deemed not to be unreasonably withheld — unless the lease expressly says otherwise. "Reasonable" generally limits the landlord to assessing the proposed new tenant's fitness: their financial strength and their business experience. A landlord cannot use the request as an opportunity to extract something unrelated — a higher rent, a new clause, or any other collateral advantage. The catch is the words "unless the lease expressly says otherwise," because landlord leases very often do.

Can a landlord override the "not unreasonably withheld" rule?

Yes, and this is the trap. The section 23 protection is a default that applies only if the lease does not contract out of it. A landlord-drafted lease can override it — for example by prohibiting assignment absolutely, by making consent subject to the landlord's "sole and absolute discretion," or by giving the landlord the right to terminate (recapture) the lease instead of consenting. If your lease contains language like that, the reasonable-consent protection you assumed you had may simply not apply. This is exactly why the assignment clause has to be read — and negotiated — before you sign, not when a buyer is waiting.

Does selling shares instead of assets avoid the lease problem?

Not necessarily. In a share sale, the buyer purchases the shares of your corporation, and the corporation — still the tenant — keeps the lease, so on its face no assignment occurs. But many commercial leases anticipate this and define a change of control of the corporate tenant as a deemed assignment that triggers the consent requirement anyway. Whether a share sale trips the clause depends entirely on how your lease is worded. So the asset-versus-share decision does not automatically solve the lease issue — you have to read the change-of-control language in your own lease.

What can a landlord legitimately ask for before consenting?

Acting reasonably, a landlord can ask for what it needs to assess the new tenant's fitness: financial statements, business history and references, the proposed use, and confirmation the buyer will assume the lease obligations. A landlord can typically also require the assignee to sign an assumption agreement, may ask the original tenant to remain on the hook (so you stay liable even after you sell), and the lease may permit a reasonable consent fee and reimbursement of the landlord's legal costs. What a landlord acting reasonably cannot do is withhold consent to squeeze a benefit unrelated to the assignee's suitability.

What if the landlord refuses consent unreasonably?

If the reasonable-consent standard applies to your lease and the landlord withholds consent without a legitimate reason tied to the assignee's fitness, you are not without options. You can document the request and the refusal, press the landlord to give reasons, and ultimately apply to the Superior Court of Justice for an order permitting the assignment. The prospect of that application is often enough to move a landlord who is being opportunistic. But litigation is slow and a pending deal rarely waits, so the far better answer is to have negotiated a clean assignment clause in the first place — and to engage the landlord early when a sale is coming.

Will I still be liable for the lease after I assign it?

Often, yes. Unless your lease (or the consent and assignment documents) clearly releases you, many landlords require the original tenant to remain liable for the lease obligations even after the assignment — so if the buyer later defaults, the landlord can come back to you. If you personally guaranteed the lease, that guarantee can survive too. Getting a full release of both the corporate tenant and any personal guarantor on assignment is one of the most important things to negotiate, ideally up front. A personal guarantee on the lease is its own significant risk for business owners and should be released at the same time.

How do I fix a bad assignment clause?

The best time is before you sign the lease, or at renewal. The key moves: replace any "sole and absolute discretion" with "consent not to be unreasonably withheld"; define what reasonable means so it is limited to the assignee's financial and business fitness; remove or cap the landlord's right to recapture (terminate instead of consenting); negotiate a permitted-transfer carve-out that lets you assign on a bona fide sale of the business without full consent; cap or eliminate consent fees; secure a release of the tenant and any guarantor on a qualifying assignment; and address change of control so a share sale is treated fairly. A commercial lease lawyer can prioritize these for your situation.

When should I look at my lease if I plan to sell?

As early as possible — ideally before you ever list the business or sign a letter of intent. The assignment clause can shape the entire deal: whether you structure it as an asset or share sale, what you can promise a buyer, and how long closing will take. Reviewing it early lets you fix problems quietly, line up the landlord, and avoid a nasty surprise at the worst possible moment. This is part of the same forward planning behind any business exit: the lease is one of the assets you are really selling, and its terms should be sale-ready long before a buyer appears.

Is the assignment clause really that important?

For any business tied to its premises — a restaurant, a clinic, a retail shop, a manufacturer with a built-out facility — it can be the single clause that determines whether you can sell at all, and for how much. A buyer is paying in part for the location, the build-out, and the goodwill attached to the address. If the lease cannot be transferred cleanly, or the landlord can block or tax the transfer, the value of what you are selling drops and some buyers walk away. I have seen otherwise-good sales stall on this one provision. It deserves the same attention as the price.

Final thoughts

The value you have built into a location-based business — the build-out, the foot traffic, the goodwill at the address — is only sellable if the buyer can actually get the keys. That makes the assignment clause one of the quietest and most consequential provisions in your lease. Ontario gives you a real starting protection in section 23 of the Commercial Tenancies Act, but it is a default that a landlord lease can override, and many do. The owners who sell cleanly are the ones who read and negotiated that clause long before a buyer appeared.

If a sale is anywhere on your horizon — this year or in five — the move is to look at your lease now, while you have time and leverage to fix it, rather than when a deal is hanging on the landlord's answer. A commercial lease lawyer in Toronto can review your assignment and change-of-control language and make your lease sale-ready. Call 416-554-1639 or book a free consultation, and we can make sure one clause does not stand between you and the sale you have spent years earning.