Anonymised, illustrative composite. A retail tenant with a five-year lease and a single renewal option let the notice window pass — and found out what an Ontario commercial lease does to a tenant who stays without renewing.
At a glance
A single-location retail tenant had operated out of the same plaza unit for five years under a lease that included one renewal option. The option was standard for the format: exercise it within a defined notice window before the term ended, or lose it. Nobody on the tenant’s side owned that date on a calendar; it lived in a signed lease document nobody had reopened since the original signing.
The lease required written notice of renewal nine months before the term’s expiry — inside the range Treadstone Law describes as typical for Ontario retail leases, which often runs six to 12 months before expiry. The tenant’s notice went out four months before expiry instead — five months past the deadline. Under an Ontario commercial lease, that is not a technicality: the option lapses on its own terms, and there is no statutory relief that revives it the way there might be for a residential tenancy.
The math the tenant was not expecting: once the option lapsed and the tenant stayed in possession past the expiry date without a signed renewal, the lease’s holdover clause put them at 150% of the last base rent — a figure Treadstone Law cites as a common holdover premium in Ontario commercial leases. On an $84,000/year base rent (3,000 sq ft at $28/sq ft), 150% is $126,000/year, or $42,000/year more — $3,500 extra every month the tenant stayed on holdover without a new lease in place.
Two things decided this, both specific to how Ontario treats a commercial lease rather than a residential one. First, the renewal option itself: missing the notice window is, in Treadstone Law’s words, “the most common and most costly mistake tenants make” — the option simply lapses; there is no court process that revives a lapsed commercial renewal option the way the Landlord and Tenant Board can sometimes soften a residential deadline. Second, what happens next is governed by the Commercial Tenancies Act, not the Residential Tenancies Act — a distinction Treadstone Law spells out directly by name: a commercial tenant who stays past expiry without a renewal is in holdover, on whatever terms the lease sets for that state, with a shortened notice period on the landlord’s side and, commonly, a rent premium of the kind this tenant hit.
The tenant paid the $3,500/month holdover premium for three months — $10,500 — while negotiating a fresh lease, since re-entering the option was no longer on the table. The new three-year lease landed at $29.50/sq ft, close to where the lapsed option would likely have priced anyway; the $10,500 was the pure cost of missing a date. For the operational side of not letting it happen twice, see tracking lease renewal dates across a portfolio and pulling the key dates out of a lease automatically so an option deadline lives somewhere other than a filing cabinet. A related reconciliation failure from the same operating side of the business is in how a CAM reconciliation dispute was settled with records.
Had notice gone out on time — any day within the nine-month window rather than five months late — the option would have been exercised on its own terms: no holdover, no premium, and a renewal rent negotiated or set by the lease's own formula rather than a fresh lease at market. The math behind the actual cost: nine months required, delivered at four months is five months (150 days) late; a $126,000/year holdover rent is $42,000/year over the $84,000 base, or $3,500/month, and three months on holdover is $10,500. The entire figure traces to one missed date, not to anything about the tenant's negotiating position or the space's value.
A renewal option's notice window is a date that exists the day the lease is signed, not a date that becomes relevant as expiry approaches. Calendar it — with a reminder well before the window opens, not just before it closes — the same day the original lease is executed, because a five-year lease means five years for a signed reminder to be forgotten.
Had notice gone out on day one of the nine-month window instead of five months late, there would be no holdover premium to calculate at all: the option would simply have renewed on whatever rent the lease's own renewal formula set, likely close to the $29.50/sq ft the fresh lease eventually landed at, since that new rate reflected current market rather than any penalty. The $10,500 cost is therefore not really a market adjustment the tenant would have paid anyway — it is the isolated cost of the calendar failure, measurable because the new lease's rate gives a clean before-and-after comparison against what the option would likely have delivered on time.
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