CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Miguel Manzano, Stikeman Elliott LLP
partnership agreements setting out matters of gov - ernance in detail. The agreement typically addresses capital contributions, business operations, profit/loss distributions and addition or removal of partners. Co-Ownerships Based on the contractual nature of a co-ownership, governance requirements vary depending on the agreement between the parties, which may establish rights and restrictions relating to the underlying land, determine profit-sharing and delegate management responsibilities. Trusts Trusts are typically governed by the trust deed, under which the trustees’ powers may be limited to merely holding title at the behest of the beneficial owner, or may extend to allowing the trustee to exercise full discretion over dealings with the subject lands. In all cases, the trustee holds all benefits derived from the land for the beneficial owner/beneficiary. 5.6 Annual Entity Maintenance and Accounting Compliance Annual legal costs for entity maintenance are typically less than CAD1,000. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time Leases and licences are contracts that permit the occupancy and use of real estate for a period of time, without buying it outright. While leases provide for exclusive possession over a specific area for a lim - ited period of time, licences might not grant exclusive possession and do not constitute an interest in land. 6.2 Types of Commercial Leases Commercial Leases The most common categories of commercial lease include commercial/office leases, retail leases and industrial/warehouse leases. Commercial leases may be further categorised into “net leases” and, rarely, “gross leases”. Under a net lease, all operating costs and expenses relating to the
property are passed on to the tenant in addition to the payment of base rent, although responsibility for capi - tal expenses may remain with the landlord. Under a gross lease, tenants are charged an “all-in” fixed gross rent to cover the landlord’s operating and capital costs and expenses, while providing the tenant certainty as to its financial obligations. Ground Leases Ground leases are generally long-term, with few land - lord obligations, and often include the right or obliga - tion of the tenant to construct and control the improve - ments on the land. In Quebec, “emphyteutic leases” (a conveyance of a dismemberment of ownership for a term) are analogous to ground leases. Ground leases allow the tenant to invest in, and enjoy the depre - ciation of, the buildings on the land. Accordingly, the landlord will enjoy a low threshold of oversight and control, while the tenant will have greater contractual certainty to protect and finance its investment. In Que - bec, an emphyteusis will also allow for the tenant to hypothecate its interest in the leased property, which is otherwise not possible under a typical commercial lease. An emphyteusis will also attract transfer duties since it is considered a transfer of property. 6.3 Regulation of Rents or Lease Terms Rents and lease terms for commercial leases are freely negotiable, with the exception that the Civil Code of Quebec caps the term at 100 years. 6.4 Typical Terms of a Lease An initial lease term typically ranges between five and ten years, subject to a tenant’s option to extend for one or more additional periods. A ground lease, in which the tenant will have financed and constructed the buildings on the land, will have a longer initial term and options to extend. In a typical multi-tenant complex, the tenant will commonly be responsible for repair and maintenance of the premises and lease - hold improvements, while the landlord may remain responsible for repair and maintenance of the build - ing (including structural items) and the common areas (typically subject to some cost reimbursement through the operating cost provisions – see 6.9 Payment of Maintenance and Repair ). In a single-tenant project, the landlord and the tenant may negotiate different
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