Canada: Terminating Tenancy - Three Lease-Break Clauses That Allow For Redevelopment

What was new and exciting 40 years ago is now in need of rejuvenation. Old office towers, tired shopping centres, rundown industrial parks — all are potential redevelopment opportunities for building owners. And if a current owner is not prepared to make the effort and take on the risks associated with redevelopment, then there is often a developer that is.


A building owner who is also a landlord wants to maintain a consistent income from its property and, at the same time, have the flexibility to terminate leases and/or relocate tenants when the time is right for redevelopment. Tenants, on the other hand, want to be dealt with fairly by a landlord that is contemplating redevelopment. Sometimes arriving at a suitable middle ground can be a struggle.

When a landlord grants a lease of premises for a fixed term, the tenant is entitled to quiet enjoyment of the premises as long as it keeps the lease in good standing. As a result, if a landlord has redevelopment in mind during the lease term, it needs to include one or more specific provisions in the lease to terminate the term or relocate the tenant's premises. Landlords that have the foresight to do this can usually avoid ongoing and costly negotiations with their tenants when they want to move forward with redevelopment.


One option is to include a provision to terminate so that demolition or substantial renovation can occur. However, from a tenant's perspective, such a provision, without qualification, can be less than satisfactory.

Some of the issues a tenant may raise include: whether there should be a restriction as to when the right to terminate can be exercised (for example, assuming that the tenant has one or more options to extend the term, perhaps only after the initial term has expired); the definition of the term "substantially renovate" and what parameters should be put around it; the type of evidence the landlord should provide of its genuine intention to demolish or substantially renovate the premises (for example, professionally prepared plans and building permits); prior notice requirements; possible compensation for the remaining (unamortized) value of the tenant's leasehold improvements; whether the landlord will financially assist the tenant in its relocation to new premises; and whether the tenant will be given any rights to lease premises in the new or redeveloped project.


A provision that gives a landlord the right to terminate a lease if it intends to sell the building could also be included in the demolition clause or be written as a standalone provision. This provision often requires that there be an actual agreement of purchase and sale between the landlord and a potential buyer before the right to terminate arises. In such cases, the notice period is typically relatively short so that termination can be accomplished on or before closing. In cases where the landlord has agreed to compensate the tenant to make a quick exit, the notice period may be even shorter.


Sometimes a development is completed in phases or located on lands that are underutilized. At some point in time, a landlord may want to make full use of its property. When this occurs, the landlord may have no intention to terminate its leases; rather, it wants to increase density, make better use of existing facilities or diversify the type of development on the site. This type of redevelopment may require temporary or permanent relocation of existing tenants, whether elsewhere in the development or in a nearby development, if the landlord owns or controls one.

In exchange for a relocation right, the landlord may be asked to promise to maintain free and open access between the existing premises and other lands and premises that become part of the development; maintain a specified parking ratio on the lands; ensure existing exclusive rights extend over the expanded area of the development; obtain the tenant's consent before building, adding to, or enlarging the existing development; and/ or refrain from making any alterations or additions to the development that would detrimentally affect the tenant's business operations, impair access to the premises or obstruct the visibility of the premises.

Other issues that typically arise when relocation provisions are being negotiated include the need to adjust rent to account for the larger or smaller size of the relocated premises (and whether there will be any limits on such an adjustment) and whether the tenant is obliged to re-use leasehold improvements from the existing premises in the relocated premises. The tenant may also request "blackout" periods, during which relocation cannot occur.

Beyond these issues, there is the hassle of relocating to a new space. To compensate for the inconvenience, the tenant may expect the landlord to pay the cost of moving to and (if the relocation is only temporary) from the relocated premises, as well as substantially contribute to the cost of installing new leasehold improvements in both locations.

An area of potential dispute is the similarity of the new premises to the old one. Factors that are considered are location, size and finish. In the case of retail space, accessibility, customer visibility and traffic flow are also taken into account. To avoid future dispute, a tenant may want the right to terminate its lease if the proposed relocated space is not comparable and, subsequently, receive payment for the remaining unamortized portion of the leasehold improvements in its existing premises.

Originally published by Canadian Property Management: GTA & Beyond Magazine.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2015

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.