New Brunswick Commercial Lease Requirements: Contracts

Unlike residential tenancies, where the government mandates a strict "Standard Form of Lease," the commercial real estate market in New Brunswick is entirely unstandardized. There is no single required form, meaning every commercial lease must be painstakingly reviewed and custom-drafted.

No Standard Mandatory Form

Because businesses range from small retail boutiques to massive industrial warehousing, a "standard" commercial lease does not exist. The law assumes both the landlord and the commercial tenant have adequate access to legal counsel to negotiate terms that suit their specific operational requirements.

The commercial lease agreement itself acts as the primary governing law regarding the relationship between the two parties. If an issue is not covered in the lease, landlords must rely on general principles of contract law and the Landlord and Tenant Act.

Critical Clauses to Include

To protect a commercial investment in New Brunswick, a well-drafted lease should address the following extensive requirements:

1. Financial Obligations (Base and Additional Rent)

Clearly define the financial structure. If the lease is a Triple Net (NNN) lease, explicitly detail the tenant's responsibility to pay their proportional share of Common Area Maintenance (CAM), property taxes, and insurance.

2. Permitted Use Exclusivity

• The Landlord: Must ensure the "Permitted Use" clause is narrow (e.g., "for the sale of men's clothing") rather than broad ("for retail sales"). If the tenant pivots their business model, a narrow clause allows the landlord to reject the change.
• The Tenant: Often demands an "exclusivity clause" preventing the landlord from leasing another unit in the same strip mall to a direct competitor.

3. Maintenance and Repair Responsibilities

Avoid vague terms like "good repair." The lease must explicitly list who is responsible for the foundation, the roof, exterior walls, HVAC replacement, interior plumbing, and daily janitorial services. Do not simply copy-paste a maintenance clause from a different property; tailor it to the specific building's age and condition.

4. Assignment and Subletting

Commercial tenants frequently sell their businesses. The lease must detail the landlord's right of consent regarding a lease assignment. Landlords typically include clauses stating that even if the lease is assigned to a new buyer, the original tenant (and their personal guarantors) remain liable for the rent if the new buyer defaults.

5. Default and Remedies

Specify exactly what constitutes a default (e.g., rent 5 days late, unauthorized alterations, bankruptcy filing). The lease must clearly outline the landlord's remedies, including the right of re-entry, forfeiture of the lease, or the aggressive right to distrain for rent (seizing the tenant’s property).

Personal Guarantees and Corporate Tenants

Often, a commercial tenant is a newly formed Limited Liability Corporation (LLC) or a corporation with few physical assets. If the business fails, the corporate veil protects the business owners from personal liability.

To mitigate this risk, commercial landlords in New Brunswick frequently require a Personal Guarantee. This separate legal document forces the owners of the tenant corporation to pledge their personal assets (homes, personal bank accounts) as collateral if the corporation defaults on the commercial lease.

The Offer to Lease

Before the massive final lease is drafted, commercial deals in New Brunswick almost always begin with an "Offer to Lease" or "Letter of Intent" (LOI).

• The LOI outlines the primary business terms: square footage, base rent, lease term, tenant improvement allowances, and the commencement date.
• While often considered "non-binding" regarding the final legal language, the LOI typically contains binding clauses regarding confidentiality and a period of exclusive negotiation.

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How Landager Helps

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