What are the main steps when parties enter into a lease?

Thursday, September 3, 2015

The main steps when a landlord and tenant enter into a lease are set out in the table below:-

  1. Preliminary negotiations – Tenant and letting-agent/ landlord engage in preliminary negotiations regarding the availability of premises, the proposed rental amount, term and options etc.
  2. Signing the “Agreement to Lease” – The landlord or its agent prepares a 2-4 page “Agreement to Lease” document setting out the important terms of the lease which landlord and tenant sign.

    This is usually prepared in anticipation of a formal full lease being prepared and signed.

    We recommend that you obtain legal advice on an “Agreement to Lease” before you sign it.

    Depending on the wording you could find yourself already bound to a Lease before the formal document is even produced.

    Likewise, a landlord could find itself bound to grant a lease to a tenant earlier than intended.

  3. Landlord submits draft Lease – The landlord’s solicitors will provide the tenant (or its solicitor) with its draft lease and other requirements for review.

    The tenant’s solicitor will review the lease at this stage and advise the tenant of important clauses, including those that may require further negotiations.

  4. Negotiation phase – The tenants’ solicitor advises the landlord’s solicitors of the changes the tenant requires to the lease.

    The landlord’s solicitor advises what requested changes are acceptable and what changes are rejected.

    Negotiation continues until there is an agreed form of lease.

    If the lease is “Retail” the landlord will also need to submit a “Lessor Disclosure Statement” which applies to the final version of the lease.

    The Tenant will also need to meet its disclosure obligations under the Act.

  5. Execution and finalisation of Lease – The tenant signs 3 copies of the lease and submits these to the landlord (along with the landlord’s other requirements – e.g. insurance, security bond etc.).

    The landlord then signs the lease in triplicate and returns one copy of the tenant.

    A Landlord will often grant access to the premises at this stage.

  6. Register Lease – The lease is registered with the Land Titles Office.

    Often this will require preparation of a Survey Plan in registrable form at the tenant’s cost.

    Registration of the lease is recommended to protect the tenant’s interests, although it is not compulsory.

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