Quebec Commercial Required Disclosures

In the commercial leasing space, which is governed primarily by the Civil Code of Québec (effective 1 January 1994), the rigorous mandatory disclosure forms found in residential real estate (like Quebec's "Section G") disappear. Commercial leasing operates on the assumption that both the landlord and the commercial tenant are sophisticated business entities capable of conducting their own due diligence.

No Mandatory Government Forms

The Tribunal administratif du logement (TAL) has no jurisdiction over commercial leases (Act respecting the Tribunal administratif du logement, s. 28). Therefore, there is no standardized, state-mandated form detailing what a commercial landlord must disclose to a prospective tenant. Commercial lease disputes fall under the jurisdiction of the Court of Québec or the Superior Court, depending on the amount in dispute.

However, under the overarching principles of the Civil Code of Québec (CCQ), landlords are bound by the duty to act in good faith prior to, during, and after the formation of the contract.

Duty of Good Faith and Warranty of Use

The CCQ requires all parties to conduct themselves in good faith (Article 1375) both at the time the obligation is created and at the time it is performed or extinguished. A commercial landlord cannot deliberately conceal vital information that would cause the tenant to walk away from the deal or demand a significantly lower rent.

Warranty of Use and Quality (Art. 1854)

Unlike residential sales which rely on Art. 1726, commercial leasing is governed by Art. 1854 CCQ. A commercial landlord is bound to deliver the property in a good state of repair and warrant to the lessee that the property may be used for the purpose for which it was leased. This includes a warranty against defects that:

1. Existed before the lease was signed.
2. Were unknown to the tenant.
3. Could not have been discovered by a prudent tenant during a normal inspection.
4. Render the premises unfit for the intended commercial use, or significantly diminish its usefulness.

If a commercial landlord knows the building's foundation floods every spring but fails to disclose this to a prospective retail tenant, the landlord would be liable for breach of the warranty of use.

Note: While commercial leases often contain clauses heavily limiting this warranty (stating the tenant accepts the premises "as is" or "tel quel"), Art. 1474 CCQ stipulates that a person may not exclude or limit liability for material injury caused through an intentional or gross fault (gross recklessness, carelessness, or negligence).

Environmental Disclosures

Environmental liability is one of the most significant risks in commercial real estate. While Section 31.58 of the Environment Quality Act (EQA) mandates a disclosure statement for the alienation (sale or transfer) of contaminated land, disclosure in a commercial lease is governed by the Civil Code.

Under the duty of good faith (Art. 1375) and the warranty of use (Art. 1854), a commercial landlord must disclose known environmental contamination that would render the premises unfit for the intended use. Failure to do so can result in the tenant successfully breaking the lease and suing for damages, especially if the contamination prevents them from operating their business or securing financing.

Zoning and Destination of the Property

The commercial landlord must ensure that the property can actually be used for its general "destination" as a commercial space.

Under Art. 1854 CCQ, the legal default is that the landlord warrants the property can be used for the purpose for which it was leased, which includes compliance with municipal zoning bylaws. However, most commercial leases explicitly shift this responsibility to the tenant, requiring them to ensure that their specific business (e.g., a cannabis dispensary, a loud boxing gym, or a heavy industrial manufacturer) is permitted. A well-drafted commercial lease will clarify that the tenant assumes responsibility for obtaining necessary municipal permits.

Due Diligence Checklist for Commercial Tenants

While the disclosure burden in commercial leasing is lighter than residential, prudent commercial tenants (and their landlords) should address the following during negotiations:

1. Phase I Environmental Site Assessment (ESA): Especially important for industrial or formerly industrial properties. The cost is typically borne by the tenant or split between parties.
2. Certificate of Location: A surveyor's report confirming the building's boundaries, encroachments, and legal compliance with municipal bylaws.
3. Zoning Verification Letter: Obtained from the municipality confirming the tenant's specific business activity is permitted under current zoning.
4. Building Code Compliance: Verification that the premises meets all applicable fire codes, accessibility standards, and occupancy limits.
5. Tax Certificates: Confirmation that all municipal and school taxes are paid and current.

Landlords who proactively facilitate this due diligence build trust and reduce the risk of post-signing disputes or lease rescission claims.

How Landager Helps

Landager's commercial compliance module includes a pre-lease due diligence checklist that tracks the status of all required assessments, certificates, and verifications. The platform stores all environmental and zoning documentation in a centralized vault, ensuring both landlord and tenant have access to a complete compliance record throughout the tenancy.

Tenant Representations and Warranties

While the focus of disclosure obligations typically falls on the landlord, commercial leases in Quebec routinely include reciprocal representations and warranties from the tenant. Common tenant disclosures include:

• Corporate Status: Confirmation that the tenant is a validly incorporated and existing corporation under Quebec or Canadian law, authorized to enter the lease and carry on business.
• No Pending Litigation: A representation that no lawsuits, regulatory actions, or insolvency proceedings are pending that could affect the tenant's ability to perform its obligations.
• Environmental Compliance: A warranty that the tenant's intended business operations will comply with all applicable environmental laws and regulations, and that the tenant will not store hazardous materials on the premises without prior written consent.
• Financial Capacity: Accurate financial statements demonstrating the tenant's ability to meet its rent obligations throughout the lease term.

These tenant representations provide the landlord with contractual remedies if the information turns out to be false, potentially justifying lease termination and damages.

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