Alberta Commercial Disclosures: Landlord Obligations & Lease

Unlike residential tenancies, Alberta's commercial leasing laws do not impose a comprehensive list of mandatory landlord disclosures. However, various statutes (such as the Environmental Protection and Enhancement Act and the Occupational Health and Safety Act), common law obligations, and best practices create a framework of disclosure responsibilities that commercial landlords must follow.

Overview of Commercial Disclosure Obligations

While the Residential Tenancies Act mandates specific disclosures for residential landlords, commercial landlords operate under a framework where specific statutory mandates override the traditional "buyer beware" (caveat emptor) principle.

Alberta Environmental Protection and Enhancement Act (EPEA)

Under the Environmental Protection and Enhancement Act (EPEA), RSA 2000, c E-12, s. 110(1), a person who releases or causes or permits the release of a substance into the environment that may cause, is causing, or has caused an adverse effect has a statutory mandate to report it.

The EPEA creates a direct disclosure obligation between a landlord and tenant:

• Duty to Affected Persons: Section 110(1)(d) requires that the release be reported to "any other person who the person reporting knows or ought to know may be directly affected by the release." This explicitly includes tenants occupying the property.
• Latent Defects: Landlords have a common law duty to disclose known "latent defects" (defects not apparent on inspection) that make the property dangerous or unfit for the intended use.
• Contractual Warranty: Most sophisticated commercial leases include specific warranties regarding the environmental condition of the site.
• Due Diligence: Environmental site assessments (Phase I and Phase II) are the standard mechanism for identifying and documenting contamination before a transaction.

When Environmental Assessments Are Required

Operating Cost Disclosures

For net leases (where tenants pay operating costs), landlords should disclose:

Annual Operating Cost Statement

• Estimated budget — Provided at the beginning of each year
• Year-end reconciliation — Actual costs compared to estimates, with tenant adjustments
• Capital expenditure plans — Planned major improvements that will affect operating costs

What Should Be Included

1. Property taxes and assessments
2. Insurance premiums
3. Common area maintenance (CAM) costs
4. Utilities for common areas
5. Property management fees
6. Landscaping and snow removal
7. Security services
8. Elevator and HVAC maintenance
9. Waste removal

Tenant's Right to Audit

Many commercial leases include an audit clause allowing the tenant to review the landlord's operating cost records. Even without a specific clause, best practice includes:

• Maintaining detailed records of all operating costs
• Providing supporting documentation upon reasonable request
• Being transparent about any management fees or markups

Building and Property Condition

In Alberta, commercial landlords have specific statutory duties regarding building condition and safety:

• General Safety Duty: Under the Occupational Health and Safety Act, SA 2020, c O-2.2, s. 10(1), every owner must ensure, as far as it is reasonably practicable, that the land, infrastructure, and buildings are maintained in a manner that does not endanger the health and safety of workers or any other person. This necessitates the disclosure of known hazards.
• Asbestos Disclosure: Under the OHS Code, Alta Reg 191/2021, s. 395(1) and 397(1), if a worker or occupant may be exposed to asbestos, the owner must ensure a competent person identifies the material and must ensure all persons who may be exposed are informed of its presence. This is a mandatory statutory requirement.
• Known structural issues — Foundation, roof, or building envelope problems must be disclosed if they constitute a latent defect.
• Building systems condition — Age and condition of HVAC, elevator, electrical, and plumbing systems.
• Planned capital improvements — Renovations or upgrades that may affect the tenant.

Zoning and Permitted Use

Commercial landlords should ensure tenants understand:

• The current zoning designation of the property
• Whether the tenant's intended use is permitted under zoning bylaws
• Any non-conforming use status and its implications
• Upcoming zoning changes that the landlord is aware of

While the tenant bears responsibility for due diligence on zoning, misrepresentation by the landlord can lead to liability.

Financial Disclosures for Multi-Tenant Properties

For commercial properties with multiple tenants:

1. Common area costs breakdown — How shared costs are allocated among tenants
2. Anchor tenant status — Whether key tenants are at risk of leaving (affects foot traffic and co-tenancy clauses)
3. Vacancy rates — Current building or complex occupancy levels
4. Exclusivity clauses — Existing restrictions on competitive businesses in the building

Insurance Disclosures The lease should clearly specify:

• Landlord's insurance obligations — What the landlord insures (building, liability, etc.)
• Tenant's insurance requirements — Types and amounts of coverage the tenant must carry
• Proof of insurance — When and how certificates must be provided
• Waiver of subrogation — Whether the parties waive subrogation rights against each other

Best Practices for Landlords

1. Be transparent — Disclose material facts even when not legally required to avoid future liability
2. Get environmental assessments — Obtain Phase I ESAs for any property with potential contamination
3. Provide clear operating cost budgets — Give tenants detailed budgets and year-end reconciliations
4. Document everything — Keep records of all disclosures, tenant acknowledgments, and inspection reports
5. Include disclosure provisions in the lease — Address environmental, operating cost, and building condition disclosures
6. Update disclosures — Inform tenants of material changes during the lease term
7. Consult professionals — Use environmental consultants, building inspectors, and legal counsel as needed

How Landager Helps

Landager's commercial property management tools help you track disclosure obligations, store environmental reports, generate operating cost statements, and maintain documentation for each tenant — ensuring transparency and reducing legal risk.

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