September 15, 2021 | Christianah

A lease agreement is a contract between a landlord and tenant that sets out the respective rights and obligations of the parties in connection with the use of the property subject to the lease. There are several provisions under a lease agreement that tenants sometimes overlook in their haste to conclude the transaction. In today’s post, we will critically examine seven important provisions tenants should negotiate before entering into a lease agreement.

Relocation

Although seemingly innocuous, a lease agreement may provide that the landlord has the right to relocate a tenant to another unit or space, usually within the exact location. While this may not occur during the lease agreement term, it is still a risk that the tenant should not dismiss. A tenant should insist on certain limitations to this right and negotiate the allocation of certain relocation costs to the landlord’s account. These costs could include costs of installations and removal of improvements. It is also crucial to have a notice period before this relocation right is effected.

Assignment or subletting

Usually, under lease agreements, tenants are prevented from subletting their lease to another party without seeking the landlord’s approval. For this reason, the lease agreement may provide as a punishment against the tenant a right to terminate the lease or increase the rent. The tenant needs to look out for this clause and negotiate a favourable outcome for itself.

Operating costs

In a lease agreement, it is not uncommon to find a provision that the tenant would pay for the operating costs incurred by the landlord to maintain and repair the leased property or premises. However, this does not mean that the tenant cannot inquire into the operating costs and audit them. It is also advisable to negotiate a period in which the operating costs would be paid so that the tenant can benefit from the amount contributed for a major repair. Negotiating this clause will allow a tenant to be exempt from paying for painting new walls when the tenant has just a few days left under a lease agreement for instance.

Repairs

This is a necessary provision because it states who is responsible for certain repairs under a lease agreement. However, this provision could create issues when the repairs are not clearly delineated between the landlord and the tenant. Our previous post examined how certain obligations to maintain a property may be imposed on landlords even after leasing it to a tenant under the Residential Tenancies Act 2006, S.O. 2006, c. 17. Therefore, tenants need to ensure that they are responsible for the wear and tear of the use of the property and not unreasonable repairs on the property.

Surrender

Most landlords provide that the tenant restore the property to its original state at the end of a lease agreement. This provision can be costly for the tenant where the property already had some improvements, perhaps put up by a previous tenant. The current tenant may be responsible for removing these improvements. Therefore, it is advisable for the lease agreement to either acknowledge these already-existing improvements or require the current tenant to remove only what they have fixed.

Environmental risks

Given today’s awareness of environmental safety, it is now common for lease agreements to provide for environmental obligations for a tenant residing in the property. It is essential for a tenant to thoroughly review this provision to ensure that they would not be responsible for environmental hazards present before it possessed the property. Therefore, the lease agreement should provide for proper risk allocation and limits to the tenant’s responsibility for environmental risks.

Default

A lease agreement should provide for some contingencies in the event of a default of the tenant’s obligation to pay rent or perform certain tasks. Minimally, the tenant should negotiate a period to cure such default so the landlord cannot terminate the agreement unilaterally immediately after a “foot fault”.

Lease agreements need to be clear and precise on the rights and obligations that the tenant and landlord agree on to prevent problems from arising in the future. It is also not prudent for the tenant to assume that some scenarios provided for under the lease would not occur, as not preparing ahead for them would have unwelcome consequences.

Both tenants and landlords should consult with an experienced real estate lawyer to ensure that their rights are well-protected in a lease agreement.

For any questions or advice on drafting or confirming your rights under a lease agreement, please don’t hesitate to contact Northview Law at 905-857-4890 or follow this link to book a free consultation.