Section 23(1) of Ontario’s Commercial Tenancies Act deems a lease clause barring assignment without consent to carry a proviso that consent is “not to be unreasonably withheld” — but only “unless the lease contains an express provision to the contrary”. A lease that hands the landlord absolute discretion is enforceable on its own terms, and the buyer inherits it.
Key takeaways
SECTION 01 OF 09
Section 23(1) of the Commercial Tenancies Act: “In every lease… containing a covenant, condition or agreement against assigning, underletting, or parting with the possession… without licence or consent, such covenant… shall, unless the lease contains an express provision to the contrary, be deemed to be subject to a proviso to the effect that such licence or consent is not to be unreasonably withheld.”
The restriction is not created by the statute — it is a clause the parties wrote. The subsection implies a standard of conduct on top of it, then hands back the power to remove it. Where the lease gives the landlord sole or absolute discretion, the proviso is not deemed in and the landlord may refuse without explaining itself.
Treadstone Law makes the point on subletting — a carefully drafted lease “can validly give the landlord broader, even absolute, discretion” — and on assignment, that where it does so “the landlord may have much broader latitude to refuse”. The first question in lease diligence is therefore not whether this landlord will be reasonable, but whether this landlord is required to be.
SECTION 02 OF 09
The word “unreasonably” appears in the whole Commercial Tenancies Act only in the marginal note to section 23 and inside its two subsections. No definition, no factors, no examples. What counts as unreasonable “is fact-specific”, decided against the particular lease, assignee and refusal.
Section 23 imposes no deadline either — subsection (2) simply contemplates a landlord who “refuses or neglects”. Treadstone Law calls consent “the step least within either party's direct control” and advises using any response deadline the lease itself provides. Nor does the Act list one condition a landlord may attach: a guarantee, a deposit, a fee, a rent increase all come from the lease. The statute polices whether a refusal is reasonable and supplies no menu of what may be asked.
SECTION 03 OF 09
Section 23(2): where a landlord “refuses or neglects to give a licence or consent to an assignment or sub-lease”, a judge of the Superior Court of Justice, on the application of “the tenant or of the assignee or sub-tenant”, may determine “whether or not the licence or consent is unreasonably withheld” and, if it is, permit the assignment.
Standing is not confined to the tenant, so an incoming buyer can bring the application itself rather than depend on a seller whose interest ends at closing. And the order does the whole job: it “is the equivalent of the licence or consent of the landlord”.
What it does not do is fit a deal timetable. This is an ordinary civil application, with no statutory clock, against the person who will be your landlord for a decade. Its value is leverage used early, while a refusal is still soft — not rescue after the outside date has passed.
SECTION 04 OF 09
Because the statute lists nothing, the asks come from practice and are predictable: financial evidence, a guarantee from the buyer’s principals, confirmation the intended use matches the permitted use, an estoppel certificate, the landlord’s own costs — set out clause by clause here. None of it is overreach: “the landlord generally has the right to review the proposed assignee's financial covenant… before deciding whether to consent”.
The ask that changes the economics is the last one. Treadstone Law reports that “landlords often use the consent request as an opportunity to update terms, such as requiring a personal guarantee or an increased deposit”, and rent renegotiation is live on older or below-market leases. A rent increase extracted as the price of consent is a permanent change to the acquired business’s cost base, landing weeks after the price was agreed on the old rent.
SECTION 05 OF 09
A tenant who assigns anyway is in breach of covenant. Section 19(2) first protects the tenant: a right of re-entry for a breach other than non-payment of rent is “not enforceable by action, entry, or otherwise” without a notice “specifying the particular breach complained of”.
Then the trap. Section 20(1) is the general relief provision and subsection 20(6) makes it apply “despite any stipulation to the contrary”. But subsection 20(7) carves this covenant out by name: “This section does not extend… to a covenant or condition against the assigning, underletting, parting with the possession, or disposing of the land leased”. Tenants were protected against forfeiture generally, and this breach was written out of the protection.
Equitable jurisdiction survives outside the Act — section 98 of the Courts of Justice Act: “A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.” Treadstone Law describes that route as one that “requires a court application and is not guaranteed”. Closing without consent is therefore no shortcut: “Occupying leased space without a completed assignment can put you in breach of the lease from day one.”
SECTION 06 OF 09
Section 24 settles what a landlord gives when it signs. A licence “extends only to the permission actually given… or to the actual assignment” authorised, and “does not prevent a proceeding for any subsequent breach”. Section 25 does the same for partial consents.
Past tolerance is no defence either: section 26 provides that a proven waiver in one instance “shall not be assumed or deemed to extend to any instance or any breach of covenant or condition other than that to which the waiver specially relates”. A buyer with a five-year exit in mind is buying one consent rather than a standing permission, and that exit will need its own.
SECTION 07 OF 09
The instinctive workaround is to buy the shares of the tenant corporation rather than the assets, because the tenant then does not change: “the corporate tenant doesn't change in a share sale”, so “there's typically no assignment for the landlord to consent to”. An asset purchase has the opposite problem — “A sale of business assets… does not automatically transfer the lease”.
Leases have been drafted against that move for years. “A deemed assignment clause treats certain events — a change of control of the tenant corporation, sale of a majority of shares, transfer of the business — as triggering the assignment provisions” without anyone moving out. That trigger is contractual, not statutory, so it is read on its own words.
Amalgamation is the other attempt, and it starts from real law: under section 179 of the Business Corporations Act, on the articles becoming effective “the amalgamating corporations are amalgamated and continue as one corporation” and the amalgamated corporation is “subject to all liabilities… and all contracts… of each of the amalgamating corporations”. Against a modern lease, though, “amalgamating instead of formally assigning won't avoid the consent requirement at all”.
SECTION 08 OF 09
On a main-street deal the building is often owned by the seller and the seller intends to keep it. The lease you are buying is then a related-party document drafted by the person about to become your landlord — and section 23(1) protects you only so far as that document does not expressly exclude it. The tax side is worked through separately in what a pre-closing carve-out of the real estate costs; the point here is that the carve-out does not only change the tax bill, it creates a landlord.
An estoppel certificate from a related party also confirms less than one signed at arm’s length: the person confirming there are no side agreements is the person who would have made them. And the building can be sold on — Treadstone Law’s answer on guarantors after a building sale, which does not address an assignor’s liability, is that a guarantee usually follows the reversion where it “is assignable and will remain enforceable against the new owner”.
SECTION 09 OF 09
Six things, all readable today. Whether the assignment covenant is qualified or absolute. How much fixed term remains. Whether renewal options survive and when their notice windows fall — “There is no statutory right of renewal for commercial tenants in Ontario”. Whether the lease is in default, since one “can complicate or block consent entirely”. What consent will cost. And who gets released: on an assignment “the original tenant (the seller) may remain liable… unless the landlord provides a formal release”, and a guaranteeing seller stays bound “unless you negotiate a guarantee that is expressly released on assignment”.
This belongs before the price because it is arithmetic, not law: a lease with twenty-two months left and no renewal, or a consent clause that lets the landlord refuse without reason, is a shorter income stream and a weaker asset, and it belongs in the multiple rather than in a post-signing surprise. One limit on all of it: this is Ontario law. Section 2 of the Act excludes tenancies governed by the Residential Tenancies Act, 2006, every province legislates its own commercial tenancies, and no other province’s statute was read for this article — so read your own clause, alongside whether the premises still suit the business.
No. Section 23(1) deems that standard into a lease’s assignment clause only where the lease does not expressly say otherwise — a lease that gives the landlord sole or absolute discretion is enforceable on its own terms, and a buyer inherits that discretion along with the lease.
Often, but not always. Because the tenant corporation itself does not change in a share sale, there is typically no assignment for the landlord to consent to — but many modern leases include a deemed assignment clause treating a change of control or sale of a majority of shares as triggering the assignment provisions anyway, so the workaround depends on the lease’s own wording.
It is a breach that Ontario’s general relief-from-forfeiture protection will not reach — the Commercial Tenancies Act carves out a covenant against assigning by name, so a tenant closing without consent can be in breach of the lease from day one, with only a discretionary equitable application under the Courts of Justice Act as a fallback, and that route is not guaranteed.
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