Negotiating a commercial
lease renewal.

By Jonathan Kleiman, Barrister & Solicitor · Published June 2026

The short version: commercial tenants in Ontario have no statutory right to renew a lease. Your only protection is a renewal option you negotiated into the lease, and even then the rent and terms turn on how that clause is drafted. So the time to win your renewal is long before the term ends — by starting early, understanding where your leverage comes from, and reading the renewal and additional-rent provisions for traps. Below is how to do exactly that.

I have sat on both sides of these conversations — reviewing commercial leases for tenants about to sign, and negotiating renewals for business owners whose term is running out. The pattern is consistent: the tenants who do well at renewal are the ones who treated it as a negotiation months in advance, and the tenants who get squeezed are the ones who assumed renewal was automatic and called the landlord a few weeks before the lease expired. This guide is meant to put you in the first group. None of it is legal advice for your specific lease — every lease is different, and yours is the document that actually governs — but it is what I want every commercial tenant to understand before they renew.

First, the hard truth: you have no automatic right to renew

Start here, because everything else follows from it. Ontario's Commercial Tenancies Act — the statute that governs commercial leases — gives a tenant no automatic right to renew and no right to stay once the term ends. This is the opposite of residential tenancies, where tenants enjoy broad statutory protection. In the commercial world, when your term expires, your right to the space expires with it unless your lease says otherwise.

That "unless your lease says otherwise" is the whole game. The one thing standing between you and the landlord's complete freedom at the end of the term is a renewal option — a clause, negotiated and signed at the outset, that gives you the right to extend for a further term on defined conditions. If you have one, it is a binding contractual right the landlord must honour on its terms. If you do not, the landlord can refuse to renew, lease the space to someone else, or name a much higher number and dare you to move. This is the single biggest reason to take lease terms seriously when you first sign — a point I make in our commercial lease review checklist.

What if my lease has no renewal option?

Then you are negotiating from scratch, and you should treat it as a brand-new deal rather than a formality. You can still renew — many landlords would rather keep a good tenant than face a vacancy — but you have no contractual right to force it, so your leverage has to come entirely from the landlord's economics (more on that below) rather than from your lease. It also means the landlord can put anything on the table: a higher rent, new clauses, a shorter term. Go in expecting a real negotiation, and get the next term's renewal option written in this time.

Start earlier than you think — the renewal timeline

The most common and most expensive mistake I see is starting late. Aim to begin the renewal conversation 9 to 18 months before your term expires, and earlier for larger or specialized spaces. There are two reasons, and both are about leverage.

First, if you hold a renewal option, it almost certainly has a strict notice window — something like "the tenant may renew by giving written notice not less than six and not more than twelve months before the expiry date." Those windows are enforced literally. Give notice a day late, or in the wrong form, and you can lose the option entirely, dropping you back to having no right to renew at all. The notice mechanics are exactly the kind of detail worth having a lawyer confirm before you rely on them.

Second, leverage takes time to build. To negotiate credibly you want to know the market rate for comparable space, you want to have at least explored alternative locations, and ideally you want the landlord to know you could actually move if the deal is bad. None of that can be assembled in the last few weeks. A landlord who senses you are out of runway — that you cannot realistically relocate before the term ends — holds all the cards. Starting early is the cheapest leverage you will ever buy.

Where your leverage actually comes from

Tenants often assume they have no power at renewal. Usually that is wrong. Your leverage comes from one simple fact: a vacancy is expensive for the landlord. When a good tenant leaves, the landlord faces months of empty space earning nothing, a leasing commission to find a replacement, a tenant-improvement allowance to build out for the new tenant, and often a few months of free rent as an inducement. Add it up and replacing you can cost the landlord far more than giving you a fair renewal.

That math is your leverage, and it is strongest when:

• You are a reliable, established tenant. A landlord knows what they have in you and does not know what they will get in a replacement. Stability has real value to them.
• Your space would be hard or slow to re-lease. A specialized build-out, a soft submarket, or an awkward unit all increase the landlord's cost of losing you.
• You have credibly explored alternatives. The ability to walk — even if you would prefer to stay — is what turns a polite request into a negotiation. You cannot credibly threaten to move if you started too late to actually do it.
• Market conditions favour tenants. Rising vacancy in your area shifts power toward tenants; tight markets shift it back to landlords. Know which one you are in.

The flip side: your leverage is weakest when your business is tied to the location (heavy build-out, loyal local clientele, a licence tied to the address), because the landlord knows moving would hurt you more than staying. If that is you, you need to start even earlier and lean harder on the renewal option you should have negotiated up front.

How renewal rent gets set — and the fair-market-rent fight

If you have a renewal option, look closely at how it sets the new rent, because this is where the real money is. There are three common approaches:

• Fixed rate or formula. The renewal rent is pre-agreed — a set figure or a defined increase (say, a fixed percentage). This is the most predictable and, for a tenant, often the safest, because there is nothing left to argue about.
• Index-linked. The rent rises by reference to an index, commonly the Consumer Price Index. Predictable in method, but the actual number depends on inflation over the term.
• Fair market rent. The renewal rent is set at the market rate for comparable space at the time of renewal. This is the most common method — and the most contested.

The fair-market-rent fight deserves its own warning. There is rarely a single correct number: it depends on which comparable buildings you use, how the space is assumed to be configured, and — critically — whether the value of improvements you paid for is included or excluded. A landlord-friendly clause can value the space "as if" it already has your build-out, effectively charging you rent on your own investment. A small difference in the rate, multiplied across a five-year term and a few thousand square feet, is serious money. A well-drafted clause defines the method and provides a neutral appraisal or arbitration to break a deadlock; a vague one is an invitation to exactly the dispute you were hoping to avoid. This is the clause I most want eyes on before a tenant relies on it.

Landlord tactics to watch for (and how to counter them)

Renewal is also where a landlord — or the property manager running the building — may try to improve their position at your expense. None of these is improper — it is negotiation — but you should recognize them and push back.

• "Renew at market" with no cap and no method. An open-ended fair-market-rent clause with no defined process lets the landlord name an aggressive number and dare you to fight it. Counter by negotiating a cap, a floor-and-ceiling collar, or a binding appraisal mechanism.
• Dropping the next renewal option. A renewal offered as a fresh lease may quietly omit any further right to renew, so you face this same squeeze again in five years with even less leverage. Ask for another renewal option in the new term.
• Surfacing a demolition or relocation clause. The landlord may insert a right to terminate early for redevelopment or to relocate you within the building — common in fast-developing parts of Toronto. Resist it, or negotiate notice, compensation, and limits.
• Clawing back the tenant-improvement allowance. Renewals sometimes come with no allowance for refurbishment even though a new tenant would get one. If the space needs work, the cost of staying should be weighed honestly against it.
• Loosening the additional-rent pass-through. A renewal can quietly widen what counts as recoverable operating cost — including capital expenditures that should not flow to you. Read the additional-rent definitions in the renewal as carefully as the base rent.

Don't fall into the overholding trap

If your term ends and you simply stay without a signed renewal or new lease, you become an overholding tenant — and it is one of the weakest positions you can be in. Ontario's Commercial Tenancies Act allows a landlord to claim up to double the rent for the period you overhold, and many leases include an overhold clause that converts your tenancy to month-to-month at 125% to 150% of the prior rent, terminable on short notice.

Either way, you have lost your security and your leverage. The landlord can ask you to leave on short notice, your rent can jump, and every advantage you had has evaporated. Tenants sometimes drift into overholding by accident, assuming "we'll sort the paperwork out soon." Do not. Resolve the renewal — or a clean exit — before the term ends, not after.

Audit your additional rent (TMI / CAM) while you're at it

Renewal is the natural moment to scrutinize your additional rent, because it is when you have leverage and the landlord's attention. In most Toronto commercial leases you pay base rent plus additional rent — TMI (taxes, maintenance, insurance) or CAM (common area maintenance) — and over a multi-year term that additional rent can rival the base rent itself. It is also where over-allocations and errors quietly accumulate.

Use the renewal to ask for a reconciliation of what you have been charged, to negotiate a cap on annual increases in controllable operating costs, to exclude major capital expenditures from your pass-through, and to pin down how the management fee is calculated. Getting the additional rent right is worth as much attention as the headline rate — sometimes more.

When to bring in a lawyer (the answer is "early")

The highest-value moment to involve a commercial lease lawyer is before you give or respond to a renewal notice — not after the terms are agreed. Early, a lawyer can confirm the notice mechanics so you do not blow the option, read the fair-market-rent and additional-rent clauses for traps, identify what the landlord may try to change, and negotiate the new term on your behalf. Late, the leverage is gone and the lawyer is mostly documenting a deal you have already lost.

This is also a good moment to think one step ahead. If you might sell your business during the new term, the lease's assignment clause can make or break that sale — something I cover in the lease clause that can kill your business sale — and renewal is a rare opportunity to fix it, as part of good business exit planning. And if a renewal dispute does end up in court, smaller commercial claims (up to $50,000) can go to the Small Claims Court, while larger ones are handled in commercial litigation in the Superior Court.

Key takeaways

• No statutory right to renew. Ontario's Commercial Tenancies Act gives commercial tenants no automatic renewal — your renewal option is your only real protection.
• Start 9–18 months out. Renewal options have strict notice windows, and leverage takes months to build. Late starters get squeezed.
• Your leverage is the landlord's vacancy cost. Lost rent, commissions, allowances, and free-rent inducements make replacing you expensive — that math is your bargaining power.
• Watch the fair-market-rent clause. It is the most contested term; insist on a defined method and a neutral appraisal or arbitration, and on excluding your own improvements from the valuation.
• Never drift into overholding. The Commercial Tenancies Act allows up to double rent, and overhold clauses run 125–150% month-to-month, with your leverage gone.

Frequently asked questions

Do I have a legal right to renew my commercial lease in Ontario?

No. Unlike residential tenants, commercial tenants in Ontario have no statutory right to renew. The Commercial Tenancies Act does not require a landlord to offer you a new term or to keep your rent reasonable when your lease ends. Your only real protection is a renewal option you negotiated into the lease before you signed it — a clause that gives you the right to extend for a further term on defined conditions. If your lease has no renewal option, the landlord is generally free to refuse renewal, change the terms, or demand a much higher rent when your term expires.

When should I start negotiating my lease renewal?

Earlier than most tenants think — typically 9 to 18 months before your term expires, and sometimes earlier for larger spaces. Two reasons. First, if you have a renewal option, it almost always has a strict notice window (for example, "not less than 6 and not more than 12 months before expiry"); miss it and the option can vanish. Second, real negotiating leverage takes time to build — exploring alternative spaces, getting market-rent evidence, and lining up your case. A landlord who knows you are out of time and cannot move has all the leverage. Starting early is the single cheapest thing you can do to improve your renewal.

How is the renewal rent decided?

It depends entirely on what your renewal clause says. The three common methods are: a pre-agreed fixed rate or formula (for example, a set percentage increase); an index-linked increase (often tied to CPI); or fair market rent, which is the most common and the most contested. A fair-market-rent clause sets your renewal rent at the market rate for comparable space, and if you and the landlord cannot agree, the clause usually sends the question to an appraiser or arbitrator. Watch the details: these clauses are often drafted to value the space favourably to the landlord, and the result can swing your rent dramatically.

What is fair market rent and why is it a fight?

Fair market rent is what comparable space would lease for on the open market at the time of renewal. It is contested because there is rarely one "right" number — it depends on which comparable buildings you use, how vacant space is treated, and whether the value of improvements you paid for is included or excluded. Landlords push the number up; tenants push it down; and a small difference in the rate, multiplied over a five-year term and a few thousand square feet, is real money. A well-drafted clause defines the method and provides a neutral appraisal or arbitration to break a deadlock. A vague one invites exactly the dispute you want to avoid.

What happens if I stay past my lease without renewing (overholding)?

You fall into "overholding," and it is a weak position. Ontario's Commercial Tenancies Act lets a landlord claim up to double the rent for the period you remain without a renewal or new lease, and many leases contain an overhold clause that converts your tenancy to month-to-month at 125% to 150% of the prior rent, terminable on short notice. Either way you lose your security and your leverage: you can be asked to leave on short notice, your rent can jump, and you are negotiating from a position of weakness. The fix is to resolve the renewal before the term ends, not after.

Can my landlord just refuse to renew?

If your lease has no renewal option, generally yes. With no statutory right to renew and no contractual option, a commercial landlord can decline to offer a new term, lease the space to someone else, or condition renewal on terms you may not like. That is exactly why the renewal option is one of the most valuable clauses in the entire lease, and why it should be negotiated in at the start. If you already hold a renewal option, the landlord must honour it on the terms it specifies — which is why those terms matter so much.

What leverage do I actually have as a tenant?

More than you might think, and it grows the earlier you start. Your leverage comes from the landlord's cost of losing you: a vacant unit earns nothing, and re-leasing means months of lost rent, a leasing commission, a tenant-improvement allowance, and often free-rent inducements to attract a replacement. If you are a reliable, long-term tenant whose departure leaves an empty space, renewing you is frequently cheaper for the landlord than replacing you — and that math is your leverage. It is strongest when you have credibly explored alternatives and started early enough to actually move if you had to.

Should I audit my TMI or CAM charges at renewal?

Yes — renewal is the natural moment to review your additional rent. TMI (taxes, maintenance, insurance) and CAM (common area maintenance) charges are often passed through with little scrutiny, and errors and over-allocations are common. At renewal you have the leverage to ask for a reconciliation, to negotiate a cap on annual increases in controllable operating costs, to exclude major capital expenditures from your pass-through, and to clarify how the management fee is calculated. Over a multi-year term, the additional rent can rival the base rent, so getting it right matters as much as the headline rate.

Do I need a lawyer to renew a commercial lease?

You are not required to, but it is one of the better-value uses of a lawyer in the life of a business. A commercial lease lawyer reviews your renewal option and its notice mechanics so you do not miss a deadline, reads the fair-market-rent and additional-rent provisions for traps, and negotiates the new term with the landlord on your behalf — including the renewal rent, the additional rent, and any clauses that weakened the original lease. The cost of a renewal review is small next to the cost of being locked into an unfavourable rate and terms for another five years.

Is a commercial lease renewal the same as a new lease?

Not necessarily, and the difference matters. A renewal under an existing option usually extends your current lease on defined terms, often carrying forward most of the original provisions. A new lease — which is what you may be offered if you have no option, or if the landlord wants to "reset" the deal — is a fresh negotiation of everything, and the landlord may try to insert new clauses (a demolition right, a changed assignment provision, a stricter use clause) or remove favourable ones (like a further renewal option). Read whatever you are handed carefully: "renewal" on the cover page does not guarantee the same deal underneath.

Final thoughts

A commercial lease renewal is not a formality — it is a negotiation in which the landlord starts with the upper hand, because the law gives you no right to stay and the clock is running against you. But that upper hand is not absolute. The landlord does not want a vacancy any more than you want to move, and the tenant who understands that, starts early, and reads the renewal and additional-rent clauses carefully can turn renewal from a squeeze into a fair deal.

The throughline is preparation. The expensive mistakes — missing the option's notice window, drifting into overholding, accepting an open-ended market-rent clause, ignoring the additional rent — are all avoidable, and all easier to avoid months ahead than weeks ahead. If your term is approaching, treat renewal as the significant business decision it is.

If your lease is coming up for renewal, a commercial lease lawyer in Toronto can review your option, flag the traps, and negotiate the new term with the landlord on your behalf — and a business lawyer can make sure the lease still fits where your company is headed. Call 416-554-1639 or book a free consultation, and we can map out your renewal well before the deadline forces your hand.