CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Patrick Morin, Stikeman Elliott LLP
6.7 Payment of VAT Goods and services tax (GST), harmonized sales tax (HST) or Quebec sales tax (QST) is payable on rent and must be collected by landlords. If the commercial tenant is registered for GST/HST/ QST purposes and is incurring the rent payments in the course of its commercial activities, up to 100% of those taxes should be recoverable by the tenant. GST/HST/QST paid by commercial landlords on their expenses is generally recover - able, whereas GST/HST/QST paid by residential landlords is not. 6.8 Costs Payable by a Tenant at the Start of a Lease A security deposit or other security may be due at the commencement of a commercial lease. In some jurisdictions, transfer tax may be triggered if the lease term exceeds certain thresholds. 6.9 Payment of Maintenance and Repair Tenants occupying leased commercial premises in a multi-tenanted development will typically pay a pro rata share of the expenses for maintaining and repairing common areas, as additional rent. In more landlord-friendly markets, responsibility for maintenance, repair and replacement costs will be allocated to the tenants, including for structural matters. However, major capital costs are often allocated to the tenant on an annual amortised/depreciated basis, so that the ten - ant’s proportionate share of such major costs is not charged to the tenant all at once. 6.10 Payment of Utilities and Telecommunications Tenants are typically responsible for the cost of their own utilities and telecommunications ser - vices, plus a proportionate share of such costs for common areas.
6.11 Insurance Issues Landlords typically insure the buildings of a leased development, whereas tenants are responsible for insuring fixtures, trade fixtures and personal property. Insurance premiums paid by the landlord are typically recovered from ten - ants as additional rent. Tenants must typically carry “all-risks” physical damage insurance and general liability insurance. The interpretation of business-interruption insur - ance provisions generally did not result in ten - ants being covered as a result of office closures during the COVID-19 pandemic. 6.12 Restrictions on the Use of Real Estate Landlords may impose restrictions on how a ten - ant uses the real estate, in addition to generally applicable land use, zoning and planning laws. The use of real estate can also be affected by restrictive covenants. 6.13 Tenant’s Ability to Alter and Improve Real Estate The terms and conditions of a lease will deter - mine whether a tenant is permitted to alter or improve leased premises or install tenant trade fixtures. Landlords often restrict work that affects the structure of the leased premises or affects or disturbs other tenants. Tenants will usually be responsible for the repair and maintenance of such work and, upon termination, the lease will dictate whether the work must be removed and the leased premises restored to their original state by the tenant, whether reasonable wear and tear is excepted, and whether improve - ments will become the property of the landlord. 6.14 Specific Regulations All Canadian provinces and territories have residential tenancy legislation; in Quebec, it is
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