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null 3 mistakes to avoid when signing a commercial lease

Here are 3 common mistakes to avoid when scouting out a location.

1. Rushing into a decision

Choosing the right location takes time and should be carefully thought out. Don't let yourself get swept away by a place!

Draw up a list of practical criteria ahead of time that you can use to guide your decision.


It may seem obvious but choosing the right neighbourhood is critical to the success of your business.

Make your choice based on criteria such as:

  • Where you live
  • Where your employees live
  • Where your competitors are
  • Where your customers are

Once you have a good idea of where you’d like to set up shop, take the time to explore the area, walk around and see what kind of opportunities it could offer your business.


Even if you’re in a great neighbourhood, the exact location of your business is important. Do your homework on how busy the street gets and whether it's gaining or losing popularity.

If you’re opening a restaurant, shop or other service-industry business, you’ll want to be visible and on a main street. However, if you don’t need to have a storefront, look for something a little bit off the beaten path, as you’ll get a better deal on rent.

Physical space

When you’re calculating the amount of square footage you’ll need to run your business, consider how much room you’ll need to grow. The place shouldn’t be too small for your needs, but it also shouldn’t be a lot bigger than you need, since the amount of rent is usually proportional to the square footage.

Also, be sure to think about the features you’ll need inside and how they’ll be used. For example, a kitchen for your employees’ lunch break will not have the same requirements as a kitchen for a restaurant.

Finally, make sure that everything is in good condition and that there are no safety risks; it’s easier to negotiate repairs or renovations before signing the lease.

2. Signing the lease without reading it

Every commercial lease is different. Commercial spaces aren't subject to the same provincial regulations as residential spaces.

Keep in mind that everything is negotiable. The lease may even make you responsible for all repairs, or state that you are responsible for certain building operating costs such as property taxes. Therefore, it is important to read it carefully.

The duration of the lease is also something you’ll need to agree on with the landlord. You’ll need to decide what you want your future to look like.

Short-term lease: 1 to 2 years

Short-term leases are ideal if you’re looking for a transitional space and can move later without any problem.

Long-term lease: 5 to 10 years

Long-term leases can have some financial advantages. With inflation and rising property values, the rent price set today could end up being below market in a few years. However, the lease could include an indexation clause allowing the rent to be increased during the course of the lease based on various criteria. In addition, building a customer base takes time. You don’t want to have to change locations just when things are starting to go well for your business.

When the lease is up, the landlord has no obligation to renew it and can offer your space to someone else. That's a good reason to consider adding a renewal option to your lease.

You need to be well informed when negotiating a commercial lease, which means you may need more extensive knowledge/experience. Consider getting help from a real estate professional for this step.

A few points to check before signing the lease:

  1. Are heating and/or air conditioning systems functional?
  2. How much is the average electricity bill?
  3. How is rent calculated?
  4. Where are the emergency exits, and are they easily accessible with nothing blocking them?
  5. What type of locks are on the doors, and are they in good condition?
  6. Has there recently been vandalism in the neighbourhood?
  7. Who is responsible for operating costs such as property taxes, repairs and maintenance services such as snow removal?

3. Failing to consider insurance

Keep in mind that you’ll also need to insure your space against potential risks. Here are a few factors to consider before you make your final decision about the place you want:

  • Are you responsible for any improvements to the premises that you'll need to insure?
  • Are the premises clean and safe?
  • Are the emergency exits free from obstruction?
  • Is there an automatic fire sprinkler system?
  • Will your customers be coming into your space? If so, is it safely set up to minimize the risk of accidents?

3 mistakes to avoid when signing a commercial lease

Small business owner of a shop

Looking for a space for your business is exciting! It’s also a decision that can make or break your business.

These tips are provided for information and prevention purposes only. They are general in nature, and Desjardins Insurance cannot be held liable for them. We recommend using caution and consulting an expert for comprehensive, tailored advice.

In Quebec, Desjardins Insurance refers to Desjardins General Insurance Inc. In Ontario and Alberta, Desjardins Insurance refers to Certas Direct Insurance Company, underwriter of automobile and property insurance.