Commercial Lease Due Diligence for an Alberta Property Acquisition

1. Create a tenancy document index

For each premises, index the lease, amendments, renewals, assignments, subleases, licences, guarantees, security, side letters, notices, correspondence and litigation or dispute records. Record date, parties, signature status, premises and relationship to prior documents.

Keep a missing-item list and do not assume a landlord's folder is complete. Request written seller confirmation of the provided record and preserve late additions or corrections.

• Tenant and guarantor
• Premises
• Lease and amendments
• Security
• Notices
• Disputes
• Missing documents

2. Confirm parties, premises and term

Match legal tenant and guarantor names to current registry evidence and the entity actually occupying and paying. Reconcile unit numbers, areas, plans, storage, parking, signage, patio, yard, roof, access and other rights to physical occupation.

Abstract commencement, fixturing, rent commencement, expiry, renewal, extension, termination and possession dates. Identify conditions and notice windows rather than recording an option as automatic additional term.

3. Abstract the complete economics

Record base rent, stepped rent, percentage or variable rent, additional rent, expense stops, gross-up, management, taxes, insurance, utilities, capital recovery, audit rights and GST treatment. Tie each item to the operative lease clause.

Track free rent, inducements, tenant improvements, commissions, allowances and outstanding landlord work. Contractual rent is not the same as collected cash or normalized NOI.

4. Review use, exclusivity and operating controls

Identify permitted use, continuous-operation duties, prohibited uses, exclusivity, radius restrictions, co-tenancy, opening conditions, hours, signs, parking, loading and rules affecting the tenant or future leasing.

Counsel should interpret triggers, exceptions, remedies and enforceability. The abstract should cite clauses and flag uncertainty rather than convert complex rights into yes-or-no marketing fields.

5. Map maintenance, repair and capital

Allocate roof, structure, envelope, mechanical, electrical, fire systems, utilities, premises, common areas, paving, snow, landscaping and replacement obligations. Identify casualty, condemnation, restoration and end-of-term removal requirements.

Compare the contractual allocation to building-condition findings and actual maintenance practice. A lease label such as 'net' or 'triple net' does not answer every cost or capital question.

6. Review assignment, subletting and sale provisions

Identify tenant assignment and sublease rights, landlord consent standards, recapture or profit-sharing rights and continuing liability. Review landlord transfer, mortgagee, subordination, attornment, non-disturbance and sale-notice provisions with counsel.

Determine whether rights of first refusal, first offer, purchase options or other transaction rights affect marketing, timing, disclosure or closing. Do not summarize them without clause-level review.

7. Trace defaults, waivers and disputes

Request notices, arrears records, payment plans, defaults, cure correspondence, claims, offsets, abatements, insurance issues and settlement or waiver documents. Compare the seller's disclosure with tenant statements and accounting records.

A current payment does not erase a prior default or continuing dispute. Counsel should determine legal effect; underwriting should preserve the cash, cost and relationship consequences.

8. Verify security and tenant evidence

Review deposits, prepaid rent, letters of credit, guarantees and other security for amount, custody, expiry, draw conditions, replenishment, transfer and current enforceability with counsel. Reconcile each item to the rent roll and closing adjustments.

Corporate searches, financial statements and insolvency records can support tenant review but must be current, entity-matched and interpreted in context. Historical performance cannot guarantee future payment.

9. Reconcile tenant certificates and seller representations

Compare each estoppel or tenant confirmation to the lease index, abstract, billing, collection, deposits, defaults, options and outstanding work. Record unanswered questions, qualifications and inconsistencies.

Coordinate the scope, required signatories, delivery threshold, seller representations, materiality and closing consequences with counsel. A clean certificate does not replace the underlying documents or property review.

10. Produce a counsel-controlled exception report

For each lease, summarize verified terms, source clauses, financial reconciliation, tenant evidence, landlord capital, disputes, missing items and transaction consequences. Separate factual abstraction from legal interpretation and underwriting assumptions.

This guide is educational and is not legal, accounting, tax, privacy, appraisal, financing or investment advice. Commercial lease language and transaction documents control the property-specific result.