Default and Cure Periods in Ontario Commercial Leases

A “default” under a commercial lease is simply a breach of one of its terms. Because commercial leases in Ontario are governed primarily by the lease document itself, common law, and the Commercial Tenancies Act — rather than the Residential Tenancies Act, which does not apply to commercial space — what specifically counts as a default, and what happens next, depends almost entirely on how the individual lease defines it.

Most leases list a range of events that constitute a default, which commonly includes failing to pay rent when due, breaching an operating covenant such as a permitted use restriction or an insurance requirement, abandoning the premises, or becoming insolvent. Some leases also treat certain serious events — such as insolvency — as an immediate default with no opportunity to cure, while most other defaults allow a defined window to fix the problem before further consequences follow. For background on the broader structure of these agreements, see our guide to commercial lease agreements in Ontario.

A monetary default occurs when a tenant fails to pay an amount owed under the lease, most commonly base rent, but potentially also additional rent such as operating costs, property tax contributions, or percentage rent where applicable. Monetary defaults are generally treated as the most serious category, since unpaid rent directly affects the landlord’s own cash flow and ability to meet its own obligations on the property.

Because of this, leases often provide shorter notice and cure periods for monetary defaults than for other types of breach — sometimes as little as five to fifteen days after written notice is given, though the exact period depends entirely on what the specific lease sets out. Some leases also impose a late fee or interest on overdue rent independent of whether the default is ultimately cured within the allowed period.

Some leases distinguish further between a first late payment in a given year and a repeated pattern of late payment, sometimes removing the cure period entirely, or shortening it significantly, after a certain number of prior late payments. A tenant with a history of occasional late rent should check whether their lease contains a clause of this kind, since it can change how much room there is to fix a future missed payment.

A non-monetary default involves a breach of some obligation other than paying money — for example, operating the business outside the permitted use, failing to maintain required insurance, making unauthorized alterations, or breaching an exclusivity commitment owed to another tenant. These defaults can be harder to measure precisely than a missed rent payment, which sometimes leads to disputes about whether a breach actually occurred at all.

Cure periods for non-monetary defaults are often longer than those for monetary defaults, reflecting that some non-monetary breaches take more time to fix — bringing a renovation into compliance, for instance, generally takes longer than simply paying overdue rent. Some leases also allow an extended cure period where the tenant is making genuine, ongoing efforts to fix the issue but cannot reasonably complete the fix within the standard window.

A recurring non-monetary breach can sometimes be treated differently from a one-off breach, even under the same lease. Some leases provide that a tenant who repeatedly commits the same type of non-monetary default within a defined period loses the right to a further cure period for that same type of breach, which is another reason a pattern of minor breaches is worth taking seriously rather than assuming each one will be treated in isolation.

The typical structure requires the landlord to give the tenant written notice identifying the specific default, followed by a defined period during which the tenant can cure it before the landlord may exercise further remedies. The length of this period, and exactly what notice must say and how it must be delivered, are set out in the lease itself rather than imposed by a single standard rule across all Ontario commercial leases.

It is worth reading this section of a lease closely before signing, since it determines how much room a tenant actually has to respond if a dispute or a genuine mistake leads to an alleged default. A lease with unreasonably short notice and cure periods, or ones that are difficult to satisfy in practice, can leave a tenant with very little room to correct an honest error before facing serious consequences.

A cross-default clause ties a default under the lease to a default under some other, separate agreement — for example, another lease the same tenant holds with the same landlord, a related loan or guarantee, or an agreement with an affiliated company. Under a cross-default clause, a problem arising entirely outside the lease itself can still be treated as a default under the lease, even where the tenant has fully complied with every obligation in that specific document.

These clauses can significantly broaden a landlord’s practical remedies, particularly for a tenant operating multiple locations with the same landlord or relying on financing tied to the lease. Because of how far-reaching a cross-default clause can be, it is generally worth identifying whether one exists in a proposed lease, and understanding exactly which other agreements it references, before signing.

If a default is not cured within the time the lease allows, a landlord typically gains access to a range of remedies set out in the lease, in addition to whatever remedies general common law and the Commercial Tenancies Act provide. These can include terminating the lease and taking back possession, re-entering the premises, and pursuing distress — the seizure of a defaulting tenant’s goods on the premises, up to the value of rent owed, without first obtaining a court order. For more on how the end of a tenancy generally plays out, see our guides on commercial lease termination and commercial tenant eviction.

Some leases also include an acceleration clause, allowing the landlord to demand the entire remaining rent for the balance of the term immediately upon an uncured default, rather than waiting to collect it month by month. Whether this remedy is available at all depends entirely on whether the lease contains such a clause, since it is not an automatic entitlement under general commercial leasing law in Ontario.

The specific events that constitute a default, the length of notice and cure periods, and the scope of any cross-default or acceleration clause are all generally open to negotiation before a lease is signed. A landlord’s initial draft often favours shorter cure periods and broader remedies, and tenants with reasonable bargaining power can sometimes negotiate more balanced terms, including a reasonable extension where a genuine, ongoing effort to cure a non-monetary default is underway.

Given how significant the consequences of an uncured default can be, it is worth reading this part of any proposed lease with particular care. More general guidance on commercial lease terms is available on the Commercial Leases hub, and specific questions about a default or cure clause in a particular lease can be directed through our contact page.