Buying Commercial Property in Ontario: Legal Pitfalls and Smart Protections
Abstract
Buying commercial property in Ontario may offer strong investment potential, but it also involves a range of legal considerations that can impact your long-term success. This blog article from Simard & Associates outlines common issues that commercial buyers may encounter, such as zoning conflicts, environmental liabilities, title defects, and financing complications. It also highlights legal strategies that can help reduce risks, like thorough due diligence, customized agreements, title insurance, and coordinating land transfer tax planning with an accountant.
Focusing on the Ottawa and Clarence-Rockland regions, the article also underscores the potential benefits of working with a local, bilingual real estate lawyer. Whether you’re an investor, a small business owner, or a first-time commercial buyer, this resource is designed to support a more informed and confident approach to navigating Ontario’s commercial property landscape.
Beyond the Transaction Lies a Legal Commitment
Buying commercial property in Ontario can be an exciting opportunity. Are you growing your investment portfolio? Buying your first storefront? Or helping clients close on a commercial space? While factors like square footage, location, and curb appeal naturally attract attention, it’s equally important to recognize that this type of purchase is a legally significant decision that may have long-term financial implications.
No matter your role, whether as an investor, business owner, or real estate professional, one thing is clear: commercial property deals can be complex. They often involve high stakes and are filled with detailed legal fine print.
Unlike residential transactions, which tend to follow more predictable legal and financial paths, commercial real estate often involves additional layers of complexity. This can include a multi-dimensional review of land use laws, environmental compliance, zoning regulations, financing terms, and title conditions. A single overlooked clause or misinterpreted bylaw may introduce significant liabilities, potentially amounting to tens or even hundreds of thousands of dollars.
Unfortunately, many buyers in Ontario may underestimate the legal weight of these deals until complications arise. Some rely on templated agreements, skip essential steps in due diligence, or assume zoning automatically aligns with their business plans. These oversights can increase exposure to risks and create situations where costly pitfalls may emerge. In such cases, the support of a knowledgeable, local legal team can be instrumental in helping reduce those risks.
Could you be overlooking opportunities for financial efficiency or legal safeguards? Are you prepared to approach your next commercial property deal with greater clarity and reduced risk?
At Simard & Associates, we support commercial buyers throughout Clarence-Rockland, Ottawa, and surrounding regions with proactive, personalized legal support. As a bilingual, community-based firm with deep roots in Ontario real estate law, we believe education plays a key role in helping clients make informed decisions. That’s why we have created this comprehensive, easy-to-read guide to help you navigate your way across the legal terrain with clarity and confidence.
In this blog, we’ll explore:
- The growing appeal of commercial real estate in Ontario, and why this trend may warrant closer legal scrutiny
- Common legal pitfalls that buyers may encounter, including zoning mismatches, environmental liabilities, title defects, and tenant disputes
- Legal strategies that may help reduce risk and support more informed, protective decision-making
- The distinct advantages of working with a local commercial real estate lawyer who understands regional laws, market patterns, and municipal processes
Whether you are closing your first deal or have experience with multiple commercial property transactions, this guide aims to offer valuable insights. It provides legal context and practical tools to help you proceed more confidently, make informed decisions, and better position your next commercial investment opportunity for long-term stability and success.
The Rise of Commercial Real Estate in Ontario: Opportunity Meets Complexity
Ontario’s commercial real estate market is currently in a dynamic phase. There has been a noticeable increase in interest from buyers pursuing multi-use developments, warehousing opportunities, and retail expansion projects. What’s driving this activity? Industry experts suggest that this momentum may be influenced by both macroeconomic trends and local growth, particularly in cities like Ottawa and regions such as Clarence‑Rockland.
Broader Market Trends: CREA Insights
The Canadian Real Estate Association (CREA) reported that non-residential building permits in Canada reached $14.58 billion from July to September 2024, representing a 9% increase year-over-year and a 14.6% rise from the previous quarter. Notably, much of the growth occurred in Ontario, where institutional projects like long-term care facilities and industrial developments led the charge.
CREA’s Q2 2024 snapshot indicated roughly $12.42 billion in non-residential building permits, though this was down over 5% from the previous year, it still showed resilience amid high borrowing costs.
These increased permit values suggest growing activity in:
- Industrial space: warehousing, distribution hubs
- Retail/institutional builds: shopping centres, healthcare facilities
- Multi-use developments: combining commercial units with residential floors
CREA notes that rising construction costs and regulatory complexities could temper this growth. However, should interest rates stabilize, the pace of new development may increase in the latter part of 2025.
Financing Impetus: A Word from BDC
The Business Development Bank of Canada (BDC), a primary financier for small and medium-sized enterprises, reinforces the trend. Their dedicated Commercial Real Estate Loan product supports the purchase or renovation of facilities, offering interest-only periods of up to 36 months and 25-year amortizations.
This financial flexibility signals a robust appetite among entrepreneurs to invest in commercial property, especially in sectors like:
- Retail: storefronts and shopping plazas
- Warehousing: due to e-commerce and supply chain expansion
- Light industrial: small‑scale manufacturing or storage
BDC’s support underlines how legal readiness is becoming a prerequisite for new buyers entering the commercial real estate landscape.
Opportunity On the Rise, But So Are the Legal Stakes
Ontario’s commercial real estate landscape appears to be experiencing notable growth, marked by increases in building permits and heightened investor interest. In regions like Ottawa and Clarence-Rockland, this momentum is beginning to translate into on-the-ground development, particularly in warehousing, retail, and multi-use property projects. The Rockland Industrial Park, for instance, is drawing interest from light industrial and logistics businesses, while Ottawa is witnessing growing demand for commercial units within mixed-use developments and revitalized retail corridors.
Complementing this trend, the Business Development Bank of Canada (BDC) has expanded access to commercial real estate loans, offering financing terms that may support acquisitions and renovations across the province. With longer amortization periods and interest-only payment options, these financial tools can make it more feasible for entrepreneurs and investors to enter or grow within Ontario’s evolving commercial property market.
However, this opportunity-rich environment also brings significant complexity. Buyers must navigate a wide range of legal considerations—including zoning regulations, environmental liability, financing structures, and title issues—that have the potential to turn a promising investment into a costly legal challenge. In this context, developing a well-considered legal strategy may be key to reducing risk and improving transactional outcomes. In the sections ahead, we’ll examine common legal pitfalls and explore strategies that can help support a more secure and informed commercial real estate transaction.
Commercial Real Estate Legal Pitfalls That May Carry Significant Cost (or More)
Understanding the potential legal risks in commercial property purchases is important. Overlooking or minimizing these issues could increase the likelihood of financial complications. Below are some of the more common legal concerns to be aware of in Ontario’s commercial property transactions:
Zoning and Land-Use Surprises
What can go wrong?
You may purchase a property with the intention of launching a retail operation, leasing to tenants, or converting upper floors into residential units, only to discover that current zoning regulations don’t permit your intended use. In some cases, municipal Site Plan Control or provincial Minister’s Zoning Orders (MZOs) can override or delay redevelopment plans.
Why is it a risk?
Zoning non-compliance has the potential to pause your project, trigger fines, or require a costly and time-consuming rezoning process. Financing or investor confidence may also be impacted if your business model no longer aligns with permitted uses.
That’s why Simard & Associates incorporates pre-offer zoning analysis, communicates with municipal planners, and obtains written zoning verification. These steps help clarify whether land use is compatible with your objectives before you commit to the transaction.
Learn about Ontario’s Zoning By-Laws
Environmental Contamination and Liability
What can go wrong?
After closing, you may discover that the property has been affected by environmental issues such as hazardous waste, leaking fuel tanks, or industrial by-products left by previous occupants. Under Ontario’s Environmental Protection Act, property owners can be held responsible for remediation, even if they were not involved in the original contamination.
Why is it a risk?
Environmental remediation can be extremely costly, sometimes reaching into the hundreds of thousands of dollars. Contaminated properties may also experience reduced market value and face challenges with refinancing, redevelopment, or resale. In some cases, liability exposure may even extend to tenants and neighbouring properties.
At Simard & Associates, we help clients incorporate environmental assessments, such as Phase 1 and, where appropriate, Phase 2 ESAs, into their due diligence process. We also work to include legal provisions in purchase agreements that may help manage or limit future liability.
Learn more about: Ontario Environmental Law Overview
Title Defects, Easements, and Encroachments
What can go wrong?
After taking ownership, you might discover that an easement grants another party access to areas such as your loading dock, or that a neighbouring structure encroaches onto your land. In some cases, liens or restrictive covenants may not be identified until after the closing process has been completed.
Why is it a risk?
These issues can limit how you use the property, potentially reduce its market value, and in some cases, lead to disputes or litigation. Hidden title defects may also complicate financing or delay municipal approvals for redevelopment.
At Simard & Associates, we conduct detailed title searches and review registered encumbrances to help clients understand their implications. Our aim is to structure contracts in a way that supports your rights and helps you identify potential obligations that may come with the property.
Learn more about: Why Title Insurance Matters (LawPRO)
Financing and Mortgage Complications
What can go wrong?
Commercial mortgage agreements may include complex terms such as balloon payments, interest-rate resets, or personal guarantees that could increase financial exposure. In some cases, overlooked clauses might give lenders the option to recall the loan if specific conditions aren’t met (e.g., tenant occupancy levels). Even in residential deals, buyers often ask do I need a lawyer to refinance my mortgage? it is particularly important in commercial transactions due to the complexity and risk involved.
Why is it a risk?
Without legal review, you might unknowingly accept terms that affect long-term liquidity or access to credit. In some situations, personal assets could be exposed if the business or property underperforms.
At Simard & Associates, we assist clients by reviewing financing documents in advance, clarifying complex terms, helping to negotiate more favorable loan conditions, and working to reduce potential personal exposure where possible.
Learn more about: BDC Commercial Real Estate Loan Program
Tenant Contracts and Lease Conflicts
What can go wrong?
You may acquire a property with existing tenants, only to later discover that their leases contain terms such as below-market rent, indefinite renewal rights, or unexpected maintenance obligations. These lease provisions typically carry over to the new owner upon purchase and may not have been fully disclosed during negotiations.
Why is it a risk?
Inherited lease obligations may restrict your ability to raise rents, undertake renovations, or pursue redevelopment plans. In some cases, long-term leases with tenant-favourable terms can reduce the property’s appraised value or affect its future marketability.
Simard & Associates offers lease audits and legal reviews of tenant agreements to help you clearly understand what you’re assuming as a new owner. We also work with clients to structure purchase contracts that may include recourse options if material lease issues are identified after an offer is made.
Learn more about: Understanding Ontario’s Commercial Tenancies Act
Skipping Title Insurance
What can go wrong?
You might choose to forgo title insurance to reduce closing costs, only to later encounter issues such as registration errors, unlisted liens, or boundary discrepancies that could affect future development or resale plans.
Why is it a risk?
According to LawPRO, over 50% of commercial real estate title claims arise from issues that are not typically identified through standard title searches. These problems can lead to significant legal costs, regulatory challenges, or even impact property rights.
At Simard & Associates, we generally recommend title insurance as a risk management tool. We collaborate with insurers to help align policy coverage with potential issues such as zoning discrepancies, boundary concerns, and registration errors.
Learn more about: TitlePLUS Title Insurance Overview
Legal Pitfalls Are Preventable – Do You Know Where to Look?
Many of these risks can be mitigated, or in some cases, avoided altogether, with early legal insight and careful planning during a commercial real estate transaction. Simard & Associates works proactively with clients in Clarence-Rockland, Ottawa, and beyond to help identify potential red flags, structure well-considered contracts, and support transactions aimed at long-term value.
Smart Legal Strategies To Help Reduce Risk for a Smoother Transaction
Avoiding legal pitfalls is important, but it’s only part of the picture. Commercial property transactions that lead to long-term value often depend on more than just damage control, they benefit from strategic foresight. Legal protections aren’t solely defensive; they can also serve as tools to help improve leverage, flexibility, and financial clarity throughout the process.
Early-Stage Legal Review Before You Make an Offer
Many buyers seek legal advice only after an offer has been accepted, potentially missing out on opportunities for early risk management. Involving legal counsel before submitting a Letter of Intent (LOI) or Agreement of Purchase and Sale can help you:
- Spot red flags before negotiations begin
- Tailor your offer to include due diligence periods, exit clauses, or zoning-related conditions
- Strengthen your negotiating position and steer clear of standard-form templates that may favour the seller
Simard & Associates frequently reviews draft LOIs and offers, supporting clients in establishing a sound legal framework early in the process, rather than responding reactively after a deal is in motion.
Customized Clauses in Purchase Agreements
Every commercial transaction is different. Yet many buyers still rely on generic contracts that may not reflect their specific risk tolerance, financing structure, or development goals. That’s why our team encourages buyers to consider the limitations of boilerplate templates and to seek guidance, such as reviewing our insights on the importance of legal review before signing an Agreement of Purchase and Sale.
A thoughtfully drafted agreement might include:
- Environmental escape clauses (linked to ESA results)
- Zoning compliance warranties
- Title remedy clauses (in case defects emerge pre-closing)
- Flexible closing or financing timelines
Simard & Associates prepares customized agreements that aim to support your exit options, clarify key terms, and help manage risk throughout the course of the deal.
Strategic Use of Title Insurance and Property Condition Reports
While title insurance has been addressed earlier, a strategic legal approach often involves layering additional protections, such as:
- Pairing title insurance with independent property condition assessments
- Reviewing policies for coverage of off-title rights (e.g., water, mineral, or air rights)
- Structuring the transaction so that insurance complements, rather than replaces, due diligence
These combined strategies can offer both coverage and context, which may be especially valuable for older buildings, rural lots, or repurposed properties. At Simard & Associates, we assist clients in aligning insurance tools with the specific characteristics and risks associated with a property, beyond simply meeting closing requirements.
Land Transfer Tax (LTT) Planning and Structuring
Thoughtful land transfer tax (LTT) planning can help reduce the risk of penalties and may offer opportunities for cost efficiency, particularly in Ottawa, where municipal surtaxes apply in addition to Ontario’s base LTT.
Examples of common LTT planning strategies include:
- Structuring purchases through partnerships or corporations (in coordination with your tax advisor)
- Identifying applicable exemptions or deferrals
- Timing the transaction to align with broader corporate reorganizations or asset transfers
Simard & Associates includes LTT planning as part of a broader transaction strategy. We work alongside your accountant to help ensure the legal aspects of your deal are compliant and aligned with your financial goals.
Integrated Zoning Certificates and Site Plan Support
When redevelopment or rezoning is part of your plans, legal support can play a critical role beyond simply verifying existing zoning status. Simard & Associates may assist by:
- Requesting Zoning Verification Letters (ZVLs) from the municipality
- Reviewing Site Plan Approval conditions
- Advising on potential minor variances or Committee of Adjustment applications
This process is intended to help clients move forward with architectural, engineering, or leasing plans with a clearer understanding of potential regulatory considerations.
Clear, Bilingual Legal Communication and Documentation
For bilingual investors, particularly those in border regions like Clarence-Rockland or clients from Quebec, clear and accurate bilingual legal communication is essential.
From French-language contracts to dual-language municipal bylaws and zoning submissions, our team supports clients in navigating transactions across linguistic and cultural contexts. We aim to safeguard rights through precise communication and offer legal services in both English and French.
In Practice: Legal Strategy Is an Investment, Not an Expense
Smart legal strategies not only help reduce risk—they may also contribute to opportunities such as smoother closings, more favourable financing terms, and stronger negotiating positions. At Simard & Associates, our goal is to help you move forward with clarity and foresight, so your commercial property transaction aligns with both your current priorities and long-term objectives.
Working with a Local Commercial Real Estate Lawyer: Why It Matters
In today’s environment, where real estate advice can often feel commoditized, access to localized legal knowledge may significantly influence the outcome of a transaction. While national firms may offer broad experience, they may not always provide the same level of on-the-ground insight or municipal familiarity that buyers in Ontario, particularly in areas like Ottawa or Clarence-Rockland, often benefit from.
Here’s why partnering with a local commercial real estate lawyer can offer strategic value beyond convenience.
Deep Knowledge of Municipal Regulations and Zoning Nuances
Each municipality in Ontario has its own development policies, zoning bylaws, and permit approval timelines. What may be permitted in Ottawa’s downtown core could be restricted in rural Clarence-Rockland or subject to different review processes.
Simard & Associates brings decades of experience in navigating:
- Rockland Industrial Park regulations
- Ottawa’s Minor Variance process
- Clarence-Rockland Site Plan Control requirements
- Heritage property considerations and rural easement rules
This regional knowledge helps us anticipate potential local challenges and support clients in moving through approval processes with greater clarity and efficiency.
Established Relationships with Local Stakeholders
Real estate law is deeply interconnected with the work of various professionals, including:
- Municipal zoning officers
- Surveyors and engineers
- Environmental consultants
- Local lenders and brokers
Simard & Associates has developed collaborative relationships with many of these stakeholders over years of local legal practice. These connections may help:
- Streamline document requests and zoning verification
- Introduce clients to trusted third-party experts
- Address challenges directly with municipal staff
These informal networks often contribute to smoother coordination and can support progress even when unexpected issues arise.
Faster Response Times and In-Person Availability
Timely action can be especially important when unexpected issues arise during due diligence, title review, or closing. Even short delays may affect financing timelines, negotiation dynamics, or compliance with regulatory requirements.
As a locally based firm in Clarence-Rockland serving the Ottawa region, Simard & Associates is positioned to offer:
- Same-day document reviews when feasible
- In-person meetings at properties or municipal offices
- Support during the critical final stages of closing
Our proximity enables us to be more accessible when timely input and face-to-face guidance matter most.
Bilingual Service in Regions Where It Truly Matters
Many commercial buyers in Eastern Ontario, particularly those near the Quebec border, are Francophone or bilingual. In these communities, real estate transactions often benefit from bilingual documentation, communication, and legal submissions.
Simard & Associates provides fully bilingual services, assisting:
- Quebec-based investors with navigating Ontario property law
- Franco-Ontarian business owners in understanding zoning, lease, and financing terms in both languages
- Cross-border buyers in meeting bilingual documentation requirements
This bilingual capability helps foster trust and promotes clearer legal understanding for all parties involved.
Local Market Insight for Strategic Decision-Making
Legal advice is often more effective when informed by local real estate economics and regional trends. At Simard & Associates, our daily work with clients across Ottawa and Clarence-Rockland enables us to:
- Share insights into neighbourhood-level considerations (e.g., floodplain exposure, industrial zoning conflicts, speculative development zones)
- Highlight valuation factors influenced by local projects or municipal planning activity
- Provide guidance on region-specific incentives or grant programs that may be relevant to your strategy
For buyers unfamiliar with Eastern Ontario’s property landscape, this local context can help inform decisions ranging from offer structure to long-term planning.
Buy with Confidence: Informed Decisions, Strategic Support!
Buying commercial property in Ontario is more than a real estate transaction, it represents a long-term legal commitment. From zoning complexities to environmental considerations, each phase presents both risk and opportunity.
At Simard & Associates, we support investors, business owners, and first-time buyers with proactive, personalized legal strategies. Our real estate lawyers, including Marc Y. Simard, Melissa Lalonde, and Elyssa A. Potvin, offer deep experience in Ontario’s commercial property laws and a strong commitment to client-focused legal support.
Whether you’re expanding a portfolio or entering the market for the first time, our team works to provide personalized guidance, local insight, and bilingual service to help you proceed with clarity and confidence.
👉 Let’s work together to support your investment. Book a Commercial Property Legal Strategy Session.
References:
https://www.ontario.ca/document/citizens-guide-land-use-planning/zoning-bylaws
https://www.ontario.ca/laws/statute/90e19
https://www.practicepro.ca/wp-content/uploads/2017/06/title-insurance.pdf
https://www.bdc.ca/en/financing/business-loans/commercial-real-estate-loan
https://www.ontario.ca/laws/statute/90c34
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