Before you sign a commercial lease in Surrey, read the offer to lease as if it were final

What should I check before signing an offer to lease?

Check whether the offer says it is binding or only a step toward a lease, and what conditions protect you: financing, permits, a business licence, the landlord's approval of your use. Then check the term and renewals, rent and deposit, fixturing and rent abatement periods, any improvement allowance, the use clause, exclusivity, and zoning.

Zoning sits outside the lease. The City of Surrey's zoning bylaw decides which uses a building allows, and a landlord's assurance is not the City's approval. Confirm zoning and the business licence before the conditions run out.

• Binding or not: an accepted offer settling the essential terms can be enforced even though a formal lease is to follow.
• Conditions: financing, a building permit, a City of Surrey business licence and the landlord's approval of plans, each with a date and a clear right to walk away.
• Term and renewal: the initial term, the renewal options, and how renewal rent is set if the two sides do not agree.
• Rent and deposit: basic rent per square foot, how the area is measured, scheduled increases, and how the deposit is applied.
• Fixturing and rent abatement: time to build out before rent starts, any period without basic rent, and whether additional rent is still payable during it.
• Tenant improvement allowance: what the landlord pays toward the build-out, when, and whether any of it is repayable if the lease ends early.
• Use and exclusivity: the permitted use, and whether the landlord will keep competitors out of nearby units.

What is additional rent, and how much will I really pay?

Additional rent is everything you pay beyond basic rent: your share of the building's operating costs, property taxes, insurance, and usually a management or administration fee. In a net or triple net lease, most of the building's costs pass to tenants. The landlord estimates it monthly and reconciles it against actual costs after each year.

What you really pay depends on what the lease lets the landlord count. Tenants usually try to exclude the landlord's financing costs, income tax, leasing commissions, capital replacements such as a new roof (or spread them over the item's useful life), and costs caused by other tenants.

Before signing, ask for actual operating costs and taxes for recent years, not only this year's estimate, and how the management fee is calculated. At each year-end reconciliation the tenant pays any shortfall or receives a credit, and a tenant-friendly lease allows an audit of the supporting records.

Do I have to sign a personal guarantee for a commercial lease?

Often, yes. When the tenant is a small or new company, landlords commonly ask its owners to guarantee or indemnify the lease personally, which means the landlord can collect unpaid rent from them. Whether you must sign depends on bargaining, but the scope is usually negotiable: a cap, a time limit, or release on assignment.

A guarantee makes the owner answerable if the tenant does not pay or perform. An indemnity goes further, making the indemnifier directly liable, possibly even after the lease is changed, extended or disclaimed in the tenant's bankruptcy. The wording, not the label, decides.

Limits worth asking for: a cap, a guarantee that falls away after the early years if rent is paid on time, a release when the lease is assigned to a qualified buyer of the business, and no amendment or extension without the guarantor's consent.

Landlords sometimes ask a spouse to sign too. A spouse in that position takes on a debt for a business they do not control, and should get independent legal advice; the independent legal advice page explains that role.

Can I sell my business or leave before the lease ends?

Only as far as the lease allows. Most commercial leases let the tenant assign or sublet only with the landlord's consent, often treat a sale of the company's shares as an assignment, and keep the original tenant liable after an assignment. Without a right to terminate, leaving early usually means paying rent until the space is re-let.

Consent clauses vary: some bar the landlord from unreasonably withholding consent, others leave it to the landlord's discretion or let it take the space back (recapture) instead. A buyer of the business will also search the Personal Property Registry under the Personal Property Security Act for security interests over the equipment.

After an assignment, the original tenant and any guarantor usually stay liable unless the landlord agrees to a release, so negotiate release terms at the start. Demolition and relocation clauses work the other way, letting the landlord end or move the tenancy.

Should I register my commercial lease on title?

A tenant with a longer lease usually should consider it. Under the Land Title Act, an unregistered lease longer than a short statutory term may not bind a buyer or lender who registers first, so a sale or foreclosure could end your tenancy. Registering the lease, or a short form of it, puts your interest on the landlord's title.

Section 20 of the Act is the reason: an unregistered interest generally binds only the person who granted it, with an exception for short leases where the tenant is in actual occupation. A tenant whose term runs past that point is exposed if the landlord sells, refinances or loses the building to its lender.

A second protection is a non-disturbance agreement in which the landlord's lender promises not to end the tenancy if it takes over the property. A long lease of part of a parcel, such as a pad site or a yard, can also count as a subdivision under section 73 of the Land Title Act and need approval first; space inside a building is generally treated differently.

Should I lease or buy through a company?

Leasing or buying through a company keeps the business's obligations in the company's name, but it changes less than owners expect. Landlords and lenders usually still want the owners' personal guarantees. A company that buys land also files a transparency report naming the people behind it, and its GST and tax position needs an accountant's view.

As tenant, the company signs the offer to lease and the lease, so it has to exist first, under its exact legal name; a lease signed for a company not yet incorporated can leave the signer personally bound. Companies are incorporated through BC Registries and Online Services under the Business Corporations Act, and an accountant usually advises on the structure.

As buyer, a company files a transparency report with the Land Owner Transparency Registry under the Land Owner Transparency Act. A commercial buyer generally pays property transfer tax when the transfer registers, and GST under the Excise Tax Act applies to most sales of commercial real property; a GST-registered buyer generally self-assesses it rather than paying the seller, which changes the cash needed at completion. Adding a holding company or partner to title later is a transfer of its own, covered on the title transfers page.

What should I check before buying a commercial strata unit for my business?

Start with what the strata lets you do there. Read the bylaws and rules on use, signage, hours, deliveries and noise, check whether the building has separate sections for commercial owners, and order the Form B information certificate. Then confirm the City's zoning allows your use and how GST applies to the price.

Sections under the Strata Property Act let commercial and residential owners in a mixed building keep separate budgets and some separate bylaws, so commercial owners are not outvoted on matters that affect only them.

The Form B information certificate shows strata fees, special levies approved or proposed, the contingency reserve fund balance and unfiled bylaw amendments; the minutes and depreciation report show repairs that may become levies. The City's zoning and licence rules apply separately from the strata bylaws.