What to carry into the decision
- Rebuild the complete remaining head-lease cash flow before discussing an exit number.
- Treat sublease rent as recovery against continuing liability, not as automatic lease termination.
- Price downtime, free rent, allowance, commission, consent costs, restoration and collection uncertainty explicitly.
- Require the executed consent, assignment or surrender documents to state who is released and which obligations survive.
Establish the obligation and the rights that actually exist
Start with the operative lease, every amendment, guarantee, indemnity, deposit or letter-of-credit instrument, premises plan and current rent ledger. Abstract the remaining term, base-rent schedule, additional rent, parking, restoration, notices, assignment and subletting language, recapture, profit sharing, consent costs, default consequences and any express termination right. A business plan to leave is not a lease right.
Model the remaining obligation from today to expiry before applying any recovery. Include scheduled escalation and supportable additional-rent growth, then identify end-of-term restoration and any deposit that may be returned. Keep the deposit as a conditional future credit rather than quietly netting it against current liability.
| Evidence | Question | Decision use |
|---|---|---|
| Lease and amendments | What transfer, consent, recapture and surrender language applies? | Defines the available legal paths |
| Remaining rent schedule | What is still payable by month and category? | Creates the carry-to-expiry baseline |
| Security and guarantees | Who remains exposed after a transfer or surrender? | Prevents an assumed release |
| Premises and condition file | What repair, removal and turnover work remains? | Prices the closeout obligation |
| Landlord correspondence | Is there an actual proposal, consent process or reservation of rights? | Separates negotiation from assumption |
Compare carry, sublease and surrender on one remaining horizon
Carrying the premises to expiry is the unmitigated cash-flow baseline: head rent and recurring costs through the remaining term, plus entered restoration, less a deliberately entered deposit recovery. A sublease keeps those head-lease payments visible and subtracts collected sublease recovery only after the entered downtime. Add free rent, subtenant allowance, commission, legal and marketing costs, landlord review costs, positive-spread sharing and collection sensitivity.
A negotiated surrender scenario includes head rent until the stated effective date, the surrender or buyout payment, professional and landlord costs, turnover work, other negotiated payments and any expressly credited deposit. Compare nominal cost and present value. Then solve the sublease rent and downtime thresholds that would make the sublease no more expensive than the entered surrender offer.
| Path | Cash outflows | Offsets and uncertainties |
|---|---|---|
| Carry to expiry | Head rent, additional rent, recurring costs, restoration | Conditional deposit recovery |
| Sublease | All head-lease outflows plus downtime, inducements, commission and consent costs | Collected subrent, recovery term, credit and profit share |
| Surrender | Rent to effective date, lump-sum payment, fees, restoration and other terms | Express deposit credit and scope of release |
| Assignment | Consent, diligence, documentation and possible consideration | Release and continuing liability require legal confirmation |
Build a consent package that answers the landlord's real questions
Sublease and assignment are not interchangeable. A sublease normally leaves the head-tenant relationship in place, while an assignment transfers the leasehold interest subject to the documents and law; neither label by itself establishes a release. Review corporate change-of-control, permitted-transfer, use, insurance, construction, signage, environmental, security, recapture, excess-rent and legal-cost provisions together.
The legal framework is jurisdiction-specific. Ontario's commercial-property guidance says tenants can sublet or assign unless the lease prohibits it, while the signed agreement may take precedence and legal advice is recommended. Ontario's Commercial Tenancies Act also contains a court process concerning consent that is allegedly unreasonably withheld. Those Ontario rules should not be generalized to another province or treated as a substitute for the actual lease and counsel advice.
- Subtenant or assignee legal name, ownership, financial information and business history
- Intended use, operating hours, loading, parking, signage and regulatory requirements
- Insurance, indemnity, security and guarantee package
- Sublease or assignment form, plans, work scope, commencement and expiry
- Requested consent, release language and every surviving head-tenant obligation
Do not close the model until the release and handover are documented
For a sublease or assignment, retain the executed transfer document, landlord consent, financial and insurance evidence, work approvals, security, payment direction and commencement evidence. Confirm whether the head tenant and guarantors remain liable, who enforces the subtenant covenants, how defaults flow through and who performs restoration at head-lease expiry.
For a surrender, document the effective date, payment, deposit treatment, premises condition, keys and access, repair and removal, environmental closeout, surviving indemnities, claims release, guarantee release and authority of every signatory. Federal insolvency legislation creates separate court-supervised rules in specific proceedings; it is not an ordinary no-cost exit method and requires specialized professional advice.
Frequently asked questions
Does subleasing end the original tenant's liability?+
Do not assume so. A sublease generally operates beneath the head lease, and the original tenant may remain responsible to the landlord. The executed lease, consent, sublease and any express release must be reviewed together by qualified counsel.
What should be included in a commercial sublease cost model?+
Keep the full head-lease obligation visible, then model downtime, sublease rent and recoveries, free rent, allowance, commission, legal and marketing costs, landlord consent costs, profit sharing, collection sensitivity, restoration and deposit timing.
How is a lease surrender different from a sublease?+
A surrender is a negotiated end or modification of the head-lease relationship on documented terms. A sublease creates a secondary occupancy arrangement while the head lease generally continues. The actual documents determine liability and release.
Can a Canadian commercial tenant simply stop paying and leave?+
Leaving the premises does not itself eliminate the lease obligation and can trigger serious remedies. Ontario's public guidance, for example, states that a fixed-term tenant seeking early termination must pay remaining rent unless the lease allows an early end. Obtain jurisdiction-specific legal advice before acting.
Primary references
These links support narrow factual points in this guide. They do not replace review of the proposal, executed lease or advice for the actual transaction.
Ontario — Renting commercial property ↗Provincial commercial-tenancy overview addressing fixed terms, early termination, assignment and subletting while emphasizing the lease and legal advice.Ontario — Commercial Tenancies Act, section 23 ↗Official consolidated statute containing Ontario-specific provisions concerning licences, assignment, subletting and applications where consent is withheld.Canada Revenue Agency — GST/HST in special cases ↗Official overview stating that commercial leases from registered landlords are generally taxable.Canada Revenue Agency — place-of-supply rules ↗Official explanation that real-property lease supplies are made in the province where the property is located for each lease interval.Canada — Bankruptcy and Insolvency Act, section 65.2 ↗Federal rules for disclaimer or resiliation of a commercial lease within a proposal proceeding; included only to distinguish that specialized process from ordinary exit planning.This guide is general educational information and financial-workflow support. It is not legal, tax, accounting, engineering, environmental, appraisal or brokerage advice. Verify source documents and obtain appropriate professional advice before acting.