A commercial lease does not need to be in writing if the term of the lease is no more than three years from the making of the lease and the rent payable by the tenant equals to at least two-thirds of the full rental value of the premises being leased.1 Any lease for more than three years or any lease wherein the annual rent payable is less than two-thirds of the annual rental value of the premises must be in writing, signed by both the landlord and the tenant or their agents and lawfully authorized in writing or by operation of law.2
It must be noted, however, that if the original term of a commercial lease is less than three years, but the lease provides that the tenant has an option to extend or renew the lease such that the tenant may continue leasing the premises beyond the date which is three years from the making of the lease, then the lease will be considered by the courts as a lease with a term of more than three years from the date of its making and which, therefore, must be in writing.3
If the landlord and tenant wish to amend their lease, they may do so by oral agreement if the original lease was not required by law to be in writing, regardless of whether or not the original lease was a written agreement.4
Although a commercial lease is not always required to be in writing to be valid, it is nevertheless recommended that the terms of a lease agreement be put into writing to avoid misunderstandings, disputes, and costly litigation in the future. If you require assistance with drafting or reviewing a lease, we would be happy to assist you.
To learn more about commercial lease agreements or for information on how we can help prepare them, contact on of our business law lawyers.
1 Statute of Frauds, R.S.O. 1990, c. S.19, s. 3; Hoj Industries Ltd. v. Dundas Shepard Square Ltd. (1978), 95 D.L.R. (3d) 354 at paras. 10-14 (Ont. Co. Ct.).
2 Statute of Frauds, R.S.O. 1990, c. S.19, ss. 1-3.
3 Pain v. Dixon (1922), [1923] 3 D.L.R. 1167 (Ont. H.C.).
4 Manchester v. Dixie Cup Co. (Canada) Ltd. (1951), [1952] 1 D.L.R. 19 at para. 19 (Ont. C.A.).
