Must a Commercial Lease be in Writing?
While oral agreements, whereby the parties agree to benefit each other in some manner, are generally valid, there are circumstances where a written agreement must be in writing to be enforceable, and these include most, but not all, commercial leases.
Statute of Frauds
In Ontario, the Statute of Frauds, R.S.O. 1990, c. S.19, requires that any lease for a term of more than three years, or any lease for a term of less than three years pursuant to which the annual rent payable is less than two-thirds of the annual rental value of the leased premises, must be in writing, signed by both the landlord and the tenant or their agents and lawfully authorized in writing. In other words, there is no requirement for a lease 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 leased premises.
What happens if the landlord grants the tenant an option to extend or renew the lease?
If the original term of a 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 entering into the lease, then such lease will be considered by the courts to be a lease with a term of more than three years and which, therefore, must be in writing.
Must an amendment to a lease be in writing?
If the landlord and tenant wish to amend their lease, they may do so by oral agreement only if the original lease was not required by law to be in writing, whether or not the original lease was, in fact, evidenced by a written agreement. However, if the original lease was in writing and contains a clause stating that any amendments must be in writing, then a written amending agreement should be signed.
The importance of a written commercial lease
Although a commercial lease is not always required to be in writing to be enforceable, it is highly recommended to put in writing the terms of a lease agreement in order to avoid misunderstandings, disagreements, and costly litigation later on.
If you require assistance with drafting or reviewing a commercial lease, we would be happy to assist you.