Four lease considerations for nonprofit social service providers

Disclaimer: The following blog is intended as general legal information not legal advice specific to your situation.

Recently, we have heard that nonprofits providing social services to individuals who are experiencing homelessness or have complex mental health needs are facing challenges from their landlords. These concerns are heightened by laws like Protect Ontario Through Safer Streets and Stronger Communities Act, 2025 which makes landlords possibly liable for illegal drug activities taking place on their premises.

In this blog, we will review some common provisions in commercial leases nonprofits may wish to pay special attention to in order to pre-empt pressures from landlords over these types of issues. Unlike residential leases, there is no mandatory form to use for commercial leases. Consequently, nonprofits and landlords have the flexibility to negotiate the terms that work for both parties.

Lease consideration one: Responsibility for common spaces

Commercial premises often include common spaces. Commercial leases generally have provisions dealing with responsibility for these common spaces. For instance, they may say the landlord may have sole discretion or subject this discretion to certain conditions.

A landlord wishing to discourage an organization’s clients from congregating in the area may remove amenities (e.g. benches and seating). This negatively impacts the experience of clients and feeling of community. What’s more, tenants are often required to contribute a pro-rated amount to the maintenance of these common areas. Consequently, organizations have a direct financial interest in requiring that these common areas maintain a standard that is commonly agreed upon as articulated in the lease (e.g. minimum seating).

Lease consideration two: Costs for security

Commercial leases often contain provisions that deal with who pays for certain collective maintenance costs, like security (which may be in the definition of maintenance). These provisions will often specify that the landlord determines when these costs are necessary, but may contain provisions that limit such expenses, e.g. requiring that they be “reasonable under the circumstances” or that prior notice be given or consent be obtained before incurred.

Landlords perceiving a “security risk” posed by clients or responding to complaints received by neighbours may incur significant security costs. This may be in addition to any security costs the nonprofit has already incurred.

Nonprofits have a direct financial interest in clear guidelines around when such expenses may be incurred, and ensure there are limits to such expenses when there is duplication or no reasonable justification for the cost. If an organization thinks there is a significant risk of operating costs being increased as a result of this, it may even be advantageous to negotiate a gross rent (one single number per square foot) as opposed to a net rent (a flat per square foot fee + a percentage of maintenance, repair and other costs). 

If provisions make clear that the nonprofit may only be charged for a pro-rated portion of such costs (and therefore the landlord must also increase the rent of other tenants in the building), it can be an opportunity to recruit other tenants as allies who may have mixed attitudes towards an organization’s clients but almost certainly universally oppose higher rents.

Lease consideration three: What the space can be used for

Commercial leases often include a “permitted uses and operating standards” section. This provision may be broad and specify that any legal activities are permitted, or it may specifically list prohibited activities, or it may offer a list of permitted activities. 

Especially with a small landlord who may be repurposing a prior use with generic provisions in this section, it is important to ensure that the permitted uses in fact cover the full range of activities an organization actually carry out and all the hours of operations. If a nonprofit has renewed a lease and expanded the types and hours of service, it may be necessary to revisit this provision rather than simply extending the lease on the pre-existing terms. 

If this section is not accurate and up to date, uses outside of the scope set out in the lease could be relied on to justify a termination for breach of the agreement (depending on what any “change of use” clause says). Related to this, note that termination rights are often scattered throughout a commercial lease, in contrast to other types of agreements that often have a comprehensive termination clause.

Lease consideration four: Dispute resolution clauses

All the clauses discussed above are generally drafted in a pretty vague way to account for the range of situations that come up. Consequently, how they apply to a specific situation may often be a matter of dispute and negotiation between a tenant and a landlord. 

As in any contract, it is often advantageous to have a provision that clarifies how such disputes are resolved without needing to go to court. This may provide for mediation, arbitration, or specific steps in a negotiation. Having a clear process may provide certainty and a greater ability to plan in a context when a nonprofit may be facing different legal challenges and pressures to its services. 

For more on how to respond to these legal challenges, check out this blog post.

Can nonprofits actually negotiate all of this?

You may wonder whether a landlord would actually be willing to entertain a discussion about changing any of these provisions in a way that would benefit you. Every situation is different, but the short answer is that in this post-COVID market, commercial tenants have more leverage than they think. We have discussed how to negotiate funding relationships, and many of the same principles apply. The moment of entering a new lease or renewing an existing lease are great opportunities to explore setting terms to protect an organization’s operations and clients.