Commercial Real Estate in Ontario: What Residential Buyers Get Wrong

by Kirby Chan, Broker

Commercial Real Estate in Ontario: What Residential Buyers Get Wrong

Why commercial tenants have far less protection than residential ones, what a quoted rent does not include, the zoning check that kills more deals than financing, and the due diligence that has no residential equivalent.

Commercial real estate property in Richmond Hill and Markham, Ontario

From Kirby Chan & Co. Real Estate Team

Read this knowing one thing up front: Kirby Chan & Co. Real Estate Team is a residential practice and we do not take commercial files. We wrote this because the question arrives regularly from clients who own businesses or are considering an investment property, and an honest explanation of how different commercial is, plus who you actually need, is more useful than a page implying competence we do not have. Section eight says plainly what we do and do not do.

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Quick takeaway: Four things catch people who know residential and are new to commercial. First, the legal regime is different: commercial tenancies in Ontario fall under the Commercial Tenancies Act rather than the Residential Tenancies Act, the law gives substantially more rights to residential tenants, and the Landlord and Tenant Board enforces the residential statute so it is not your forum. Your protections are largely the ones written into your lease. Second, a quoted rent frequently is not what you pay, because net leases add realty taxes, maintenance and insurance as additional rent that is estimated and then reconciled. Third, zoning kills more deals than financing, and a use that seems obviously appropriate may not be permitted. Fourth, due diligence includes environmental and building condition work with no residential equivalent, which is why the conditional period matters more than the price negotiation.

What This Guide Covers

1. Why This Is a Different Transaction
2. The Legal Regime Is Different, and Tenants Have Far Less Protection
3. What Rent Actually Means: Gross, Net and Additional Rent
4. Zoning and Permitted Use: The Most Common Deal Breaker
5. Due Diligence: What Actually Gets Checked
6. Financing, HST and the Numbers Side
7. Buying for Your Own Business, or Buying as an Investment
8. Who to Involve, and What We Do and Do Not Do
9. Eight Mistakes
Frequently Asked Questions

1. Why This Is a Different Transaction

Start Here The Deal Is in the Documents, Not the Price

In a residential purchase, much of the transaction runs on familiar standard forms, and the parts that vary are the price, the dates and a handful of conditions. The framework does a lot of work for you.

Commercial is not like that. There is no equivalent body of familiar standard paperwork, so agreements are commonly drafted or heavily amended for the specific deal. That cuts both ways: far more is genuinely negotiable, and far more can be in the document that you did not expect and nobody will point out.

The second structural difference is where the risk sits. In residential, the big risks are price and financing. In commercial, the big risks are what the property can legally be used for, what condition it is actually in, what is attached to the land, and what the existing leases say. Those are discovered through due diligence, not through negotiation.

Which is why the conditional period is the whole transaction. An agreement with a strong price and a thin conditional period is a worse deal than one with a modest price and enough time to establish what you are buying. Experienced commercial purchasers negotiate the due diligence period as hard as the price.

And a third point worth stating plainly. Commercial transactions assume a more sophisticated buyer, and the practical consequence is that you are expected to find problems yourself rather than be told about them. The rest of this page is about where to look.

2. The Legal Regime Is Different, and Tenants Have Far Less Protection

The Most Important Section on This Page The Commercial Tenancies Act, Not the Residential Tenancies Act

If you take one thing from this page, take this, because it surprises almost every first-time commercial tenant.

In Ontario, commercial tenancies are governed by the Commercial Tenancies Act. Residential tenancies are governed by the Residential Tenancies Act. They are different statutes with different consequences, and the law gives substantially more rights to residential tenants than to commercial tenants.

The Landlord and Tenant Board enforces the residential statute. It is not the forum for a commercial tenancy dispute, which means the familiar route a residential tenant would take is simply not available to you.

The practical consequence, stated as plainly as we can. Your protections as a commercial tenant are largely the ones written into your lease rather than ones the legislation supplies for you. If a protection is not in the document, you may not have it. That is the entire reason a commercial lease needs a lawyer before signing and not after, and it is why the review is not a formality.

One further wrinkle worth knowing. A tenancy can be treated as residential even under a commercial lease where the premises are used mainly as a home, which matters for mixed use properties and live-work arrangements.

This is a summary and the statutes govern. Nothing here should be used to determine your rights in a particular tenancy. Confirm with a lawyer who does commercial leasing.

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3. What Rent Actually Means: Gross, Net and Additional Rent

A Quoted Rate Is Not What You Pay Ask What Is Included Before You Compare Anything

Commercial space is frequently quoted in a way that does not tell you what it costs, and comparing two quoted rates without knowing their structure is meaningless.

In a gross lease, the quoted rent is intended to cover most of the property costs, so the figure is closer to what you actually pay.

In a net lease, you pay base rent plus a share of specified property costs on top. Where those costs commonly include realty taxes, maintenance and insurance, the arrangement is often called triple net, and the additional amounts are usually described as additional rent.

The part that catches people is that additional rent frequently moves. In many leases it is estimated for the year and then reconciled against actual costs, which means you can receive an adjustment you did not budget for. It also means a landlord's estimate is an estimate rather than a cap.

So the questions to ask before comparing any two spaces. What does the quoted figure include and what is additional. How is additional rent calculated, estimated and reconciled. What has it actually been for each of the last few years. Is there a cap on any component. And what happens to it if the building's taxes are reassessed.

Then ask about everything that is not rent at all: utilities and how they are metered, who maintains and replaces the major building systems, restoration obligations at the end of the term, and whether you are responsible for any part of the structure or the roof. No figures appear on this page because all of them vary by building and by deal.

4. Zoning and Permitted Use: The Most Common Deal Breaker

Confirm Before You Commit A Use That Seems Obvious May Not Be Permitted

This is the item that kills more commercial deals than financing, and it is entirely discoverable in advance.

Zoning determines what uses are permitted on a property, and the permitted use list for a given zone is specific. A use that seems plainly appropriate for a building may not be permitted, may be permitted only with conditions, or may require parking the site cannot provide.

A listing description or a landlord's assurance is not confirmation. Neither is the fact that a similar business operates nearby, which may be legally non-conforming or may sit in a different zone. Confirm the specific intended use for the specific address with the municipality.

Where the use is not permitted, the routes are a minor variance or a rezoning, both of which take time, cost money and carry no guarantee of approval. An agreement that depends on either should be conditional on obtaining it, with enough time to actually do so.

And look beyond the zoning by-law itself. Site plan conditions, easements, restrictive covenants on title, heritage designation and parking requirements can all constrain what you may do with a property, and they do not appear in a zoning summary.

Requirements differ between Richmond Hill, Markham and other municipalities and they change, so the answer comes from the municipality and your lawyer rather than from any article. Our guide to zoning in Richmond Hill and Markham covers how the residential side works.

5. Due Diligence: What Actually Gets Checked

Five Workstreams, None of Them Residential

1. Environmental. A Phase I environmental site assessment reviews records and the site to identify potential contamination concerns from historical and nearby uses, and where concerns are identified a Phase II involves sampling and testing. This has no residential equivalent and it matters because historical industrial, automotive, dry cleaning or fuel storage uses can leave liabilities attached to the land. Lenders frequently require one. Scope it with a qualified environmental consultant during the conditional period.

2. Building condition. A building condition assessment is not a home inspection. It examines the structure, envelope, roof, and the mechanical, electrical and life safety systems, and it should produce an estimate of remaining useful life and capital expenditure for each. What you want to know is not only what is broken but what is about to need replacing.

3. Title and survey. Easements, rights of way, restrictive covenants, encroachments and whether the building sits where everyone assumes it does. A current survey is frequently worth obtaining rather than relying on an old one.

4. The existing leases, if the property is tenanted. This is where the income you are buying either is or is not real. Read every lease rather than a rent roll summary, and request estoppel certificates from tenants confirming the terms, the rent, what has been paid and that there are no disputes. A rent roll is a landlord's representation; an estoppel is the tenant's confirmation.

5. Operating costs and the municipal file. Actual historical operating costs rather than projections, utility consumption, outstanding work orders or compliance issues with the municipality or fire services, and the realty tax assessment and any appeal history.

6. Financing, HST and the Numbers Side

Different From a Residential Purchase in Almost Every Respect

Financing is underwritten differently. A commercial lender is looking at the property's income and the quality of the covenants behind it as much as at the borrower, so the leases, the tenant mix and the lease expiry profile affect what can be borrowed. Expect more documentation, longer timelines, an appraisal on the lender's terms and often an environmental requirement. Build that timeline into your conditional period rather than discovering it late.

HST is a live consideration on a commercial purchase or lease in a way it generally is not on a residential resale, including on additional rent, with input tax credits potentially available to registrants. The registration questions, self assessment rules and whether a particular component is taxable all depend on circumstances and change. Establish your position with an accountant and a lawyer in writing before signing. No rates or amounts appear here.

Valuation works differently too. Residential value is established principally from comparable sales. Commercial value is commonly approached through the income the property produces, which means the quality, length and security of the leases drive the number rather than the finishes. A building with a strong tenant on a long lease and a building with the same bricks and a weak month to month tenant are not worth the same.

Which has a consequence sellers underestimate. Improving the leases can affect value more than improving the building, and a vacancy filled on poor terms before a sale can cost more than it earns.

No cap rates, yields, rates or price figures are quoted on this page, because they vary by asset type, location, tenant quality and market conditions, and any figure written here would be wrong within months.

7. Buying for Your Own Business, or Buying as an Investment

Two Different Transactions That Look Similar

Buying premises for your own business is an operational decision wearing a real estate costume. The questions are whether the space suits the business, whether the location works for staff and customers, whether the zoning permits what you do, and whether you are confident about your space needs over the period you would be committing capital. A business that outgrows or shrinks out of a building it owns has a harder problem than one with a lease coming to an end.

Buying as an investment is a question about income and the security of that income. The leases are the asset. Lease expiry profile, tenant quality, how much of the income depends on one tenant, and what happens on renewal matter more than almost anything physical about the building.

The comparison people skip. If you are weighing owning your own premises against leasing, run both with your accountant over the same horizon, including the capital tied up, the responsibility for the building and the exposure to a single property on one side, and the renewal risk and absence of equity on the other. Instinct tends to favour ownership more than the arithmetic does.

And one hybrid worth naming, since it comes up often: buying a building larger than your business needs and leasing the balance. That makes you a landlord, with the lease drafting, tenant selection and management obligations that come with it, and it should be entered deliberately rather than as an afterthought.

Either way the professional team is the same and it is the subject of the next section.

8. Who to Involve, and What We Do and Do Not Do

Said Plainly Our Practice Is Residential

Here is the honest part, and it is the reason this page exists in the form it does. Kirby Chan & Co. Real Estate Team is a residential practice, working in Richmond Hill, Markham, Thornhill and York Region. Commercial is a different discipline with its own due diligence, lease structures, valuation approaches and professional network.

So we do not take commercial files. For a commercial purchase, sale or lease we will say so and, where we can, point you toward a commercial brokerage or professional suited to the asset type. We will also help with the residential side of any related move, which is frequently what the enquiry turns out to be about.

This page exists because the questions arrive regularly and an honest explanation is more useful to you than silence or a page implying competence we do not have.

The team a commercial transaction actually needs. A commercial real estate agent or broker experienced in your asset type and submarket. A lawyer who does commercial real estate and commercial leasing, not a general practitioner. An accountant, for the HST and structuring questions. A commercial mortgage broker or lender. A qualified environmental consultant. A building condition consultant or engineer. And, if the property is tenanted and you are not managing it yourself, a property manager.

Engage the lawyer before you sign anything, including a letter of intent or an offer to lease, because terms agreed in a document described as non-binding have a way of becoming the deal.

9. Eight Mistakes

All Eight Are Common and All Eight Are Avoidable

1. Comparing quoted rates without knowing their structure. A gross figure and a net figure are not comparable numbers.

2. Assuming your use is permitted. Confirm the specific use at the specific address with the municipality before you commit.

3. Negotiating the price hard and the conditional period softly. The due diligence period is where the value is protected.

4. Taking a rent roll as fact. Read the leases and get estoppel certificates from the tenants.

5. Skipping environmental work because the building looks fine. The risk is historical use and it is invisible.

6. Treating a building condition assessment as a home inspection. You want remaining useful life and capital expenditure, not a defect list.

7. Signing a letter of intent or offer to lease without a lawyer on the basis that it is not binding yet.

8. Assuming commercial tenants have the protections residential tenants have. They do not, and whatever is not in your lease may simply not exist.

Recognition

Kirby Chan Awards and Achievements

🏆 2026 Platinum Award, Real Estate Agent, Markham

🏆 2026 Platinum Award, Real Estate Broker, Markham

🏆 2026 Platinum Award, Real Estate Agent, Vaughan

🏆 2026 Platinum Award, Real Estate Broker, Vaughan

🏆 2026 Platinum Award, Real Estate Agent, Brampton

🏆 2026 Platinum Award, Real Estate Broker, Brampton

🏆 #1 Individual Producer in Ontario for eXp Realty 2024

🏆 Top 3 Best Rated Real Estate Agent in Richmond Hill

🏆 Toronto Star Platinum Award for Best Real Estate Agent

🏆 Top Real Estate Agent Award in Markham

🏆 2X ICON Agent Award with eXp Realty

🏆 2025 Community Votes Platinum Award, Thornhill

🏆 2024 Community Votes Platinum Award, Thornhill

🏆 2023 Community Votes Platinum Award, Thornhill

🏆 2025 Gold Award for Real Estate Brokers in Markham

🏆 2024 Community Votes Bronze Award, Richmond Hill

Frequently Asked Questions

How is buying commercial real estate different from buying a home in Ontario?

Three differences matter most. First, there is no equivalent of the familiar residential standard forms, so a commercial agreement is usually drafted or heavily amended for the deal and the terms are genuinely negotiable rather than filled into blanks. Second, the legal regime is different: commercial tenancies in Ontario are governed by the Commercial Tenancies Act rather than the Residential Tenancies Act, and the Landlord and Tenant Board enforces the residential statute, so it is not the forum for a commercial dispute. Third, the due diligence is broader and includes environmental, zoning and building condition work that has no residential counterpart. The conditional period exists to do that work, and the quality of the due diligence usually determines the outcome more than the price negotiation does.

Are commercial tenants protected like residential tenants in Ontario?

No, and this is the most important thing for a first-time commercial tenant to understand. Commercial tenancies are governed by Ontario's Commercial Tenancies Act while residential tenancies are governed by the Residential Tenancies Act, and the law gives substantially more rights to residential tenants than to commercial tenants. The Landlord and Tenant Board enforces the residential statute, so it is not available for a commercial tenancy dispute. In practice this means your protections are largely the ones written into your lease rather than ones the legislation supplies, which is why a commercial lease should be reviewed by a lawyer before signing rather than after. Note also that a tenancy can be treated as residential even under a commercial lease if the premises are used mainly as a home.

What does triple net mean in a commercial lease?

It refers to how costs are allocated between landlord and tenant. In a gross lease the quoted rent is intended to cover most costs. In a net lease the tenant pays base rent plus a share of specified property costs on top, commonly realty taxes, maintenance and insurance, which is where the term triple net comes from. Those amounts are usually called additional rent, and in many leases they are estimated and then reconciled, so they can change. The practical consequence is that a quoted rate on its own does not tell you what you will pay. Ask what the quoted figure includes, what is additional, how additional rent is estimated and reconciled, and what it has actually been over the last few years.

Do I need to check zoning before buying or leasing commercial space?

Yes, before you commit, and it is the single most common deal breaker. Zoning determines what uses are permitted on a property, and a use that seems obviously appropriate may not be permitted, may require parking the site does not have, or may need a minor variance or rezoning with no guarantee of approval. A landlord's description of permitted use, or a listing, is not a substitute for confirming with the municipality. There may also be site plan conditions, easements or restrictive covenants affecting what can be done. Confirm the specific intended use for the specific address with the municipality and with a lawyer during the conditional period.

What is an environmental site assessment and do I need one?

An environmental site assessment is an investigation into whether a property has contamination or environmental risk. A Phase I assessment is a records and site review that looks at historical use and nearby uses to identify potential concerns, and where it identifies them a Phase II involves sampling and testing. It is a standard part of commercial due diligence and has no residential equivalent, because historical industrial, automotive, dry cleaning or fuel storage uses can leave liabilities attached to the land. Lenders frequently require one. Whether and what level is appropriate for a particular property is a question for a qualified environmental consultant and your lawyer, and it should be scoped during the conditional period rather than after closing.

Is HST payable on commercial real estate?

The tax treatment of commercial property differs from residential and generally HST is a live consideration on a commercial purchase or lease, including on additional rent, with input tax credits potentially available to registrants. The amounts, the registration questions, the self-assessment rules and whether any particular transaction or component is taxable all depend on the circumstances and change. This is accountant and lawyer territory before you sign, not something to estimate from an article, and getting it wrong is expensive. No rates or amounts are quoted here deliberately.

Should I buy a commercial building for my own business or lease?

They are different decisions with different risks. Owning gives you control of the premises, no renewal risk and the property as an asset, at the cost of capital tied up, responsibility for the building and exposure to a single property. Leasing preserves capital and flexibility at the cost of renewal risk and no equity. The question that often decides it is how certain you are about your space needs over the term you would be committing to, because a business that outgrows or shrinks out of a building it owns has a harder problem than one with a lease ending. Model both with your accountant rather than deciding on instinct.

Does Kirby Chan & Co. handle commercial real estate?

The team's practice is residential, in Richmond Hill, Markham, Thornhill and York Region. Commercial work is a different discipline with its own due diligence, lease structures, valuation approaches and professional network, and a residential team taking on a commercial file is not serving the client. So for a commercial purchase, sale or lease the team will say so and, where it can, point you toward a commercial brokerage or professional appropriate to the asset type, and it will help with the residential side of any related move. This page exists because the questions arrive regularly and an honest explanation is more useful than silence.

Who should I call about a commercial property in Richmond Hill or Markham?

A commercial real estate agent or broker experienced in your asset type and submarket, together with a lawyer who does commercial real estate and leasing, an accountant, a commercial lender or mortgage broker, a qualified environmental consultant and a building condition consultant. Kirby Chan is a Broker with Kirby Chan and Co. Real Estate Team at eXp Realty, and the team's practice is residential, in Richmond Hill, Markham, Thornhill and York Region. For a commercial matter the team will say so and, where it can, point you toward a commercial professional suited to the asset type, and it will help with the residential side of any related move. Reach the team at 416-305-8008.

Contact Kirby Chan

We Do Residential, and We Will Tell You When We Are the Wrong Call

If your question is about a home in Richmond Hill, Markham or Thornhill, that is our work and we will bring the comparables with their listing history. If it is about a commercial purchase, sale or lease, we will say so on the first call rather than the third, and where we can we will point you toward a commercial professional suited to the asset. If your situation is both, which it often is, we will handle the residential half and stay out of the other one.

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Note: This guide is general information about commercial real estate in Ontario and is not legal, tax, financial, accounting, mortgage, environmental, engineering, appraisal or investment advice, and it does not create a solicitor and client relationship with anyone. Commercial transactions are negotiated individually and the documents govern; every statement here about what commercial agreements and leases commonly contain is general and your own documents control. Commercial tenancies in Ontario are governed by the Commercial Tenancies Act and residential tenancies by the Residential Tenancies Act; the descriptions here of those statutes, of the respective rights of commercial and residential tenants, and of the role of the Landlord and Tenant Board are general summaries at the time of writing, are subject to conditions and exceptions, and must be confirmed with a lawyer before you rely on them, and nothing here should be used to determine your rights or obligations in any particular tenancy. Whether a tenancy is commercial or residential depends on the circumstances, including the use of the premises. Zoning, permitted uses, parking requirements, site plan conditions, heritage designation and variance and rezoning processes are set by each municipality, differ between Richmond Hill, Markham and other municipalities, and change; permitted use for any specific property and intended use must be confirmed with the relevant municipality and a lawyer before you commit, and nothing here should be relied on to determine whether a use is permitted. Environmental site assessments must be scoped and carried out by qualified consultants, and building condition assessments by qualified consultants or engineers; the descriptions here of what such assessments involve are general. HST treatment of commercial property, including on purchase price and additional rent, registration, self assessment and input tax credits, depends on the circumstances of the parties and the transaction, changes over time, and must be confirmed with an accountant and a lawyer before signing. No prices, rents, rates, cap rates, yields, operating costs, HST rates, fees or other figures are quoted here because they vary by asset type, location, tenant quality and market conditions and would be out of date. Nothing here is a representation or guarantee as to the income, value, condition, compliance or performance of any property, and no investment recommendation is made. Letters of intent and offers to lease may create binding obligations notwithstanding how they are described and should be reviewed by a lawyer before signing. Kirby Chan & Co. Real Estate Team is a residential practice and does not provide commercial real estate brokerage services; any referral to another brokerage or professional is a referral to an independent third party and readers should verify credentials and satisfy themselves independently, and no warranty is given as to any third party's services. Market conditions vary. Consult appropriately qualified professionals for advice specific to your situation.