What a direct lease is
A direct lease is a contract with the owner that gives you exclusive possession of defined premises for a term. It is the standard way businesses occupy warehouse space for the long run. In Alberta a commercial tenancy is governed mainly by the lease itself and the general law — the Residential Tenancies Act does not apply — so the document is the deal. Most landlords start from their own standard form.
Who it suits, and who it doesn't
It suits stable operations that need to invest in the space — offices, racking, power, equipment — and want enough certainty to recover that investment, plus renewal rights to stay. It doesn't suit a business with uncertain growth, a short project, or owners unwilling to back the lease personally if the landlord asks. For shorter horizons, look at a sublease or a short-term bay.
From offer to signed lease
- Tour and shortlist. Test each space against your operation; the viewing checklist helps.
- Offer to lease. It sets the premises, area, term, rent, estimated additional rent, inducements, deposit, possession date and conditions.
- Conditions period. The landlord reviews your financials; you confirm your use with the municipality, inspect the space and review costs.
- Lease document. Usually the landlord's form, reviewed by your lawyer before you waive conditions.
- Waive, sign and pay the deposit.
- Possession and fixturing, then the rent start date.
How a net lease is priced
Most warehouse leases are net. You pay base (net) rent plus additional rent: your share of operating costs, property tax, the building's insurance and sometimes a management fee. Additional rent is paid monthly on the landlord's estimate and reconciled annually against actual costs, which can mean a bill or a credit. Commercial rent in Alberta is generally subject to GST, and there's no provincial sales tax.
| Line | What to check |
|---|---|
| Base rent | How the area is measured, and any fixed steps during the term |
| Operating costs | What's included and excluded, and whether capital repairs can be charged back |
| Property tax | Whether your unit is separately assessed or shared by formula |
| Management fee | Whether it applies, and what it's calculated on |
| Utilities | Separately metered or allocated |
| Reconciliation | Your right to see the supporting statements |
Term, renewal and inducements
Direct leases commonly run several years; small bays are often three to five. A renewal option lets you extend, usually at then-market rent, if you give notice inside a set window — miss the window and the right can be lost. Options are often personal to the original tenant.
Inducements are the landlord's contribution for your commitment. Free rent usually waives base rent only; additional rent is often still payable. A tenant improvement allowance is money toward your fit-out, commonly paid after the work is done and documented. Landlord's work is work the landlord completes before handover. Inducements tend to grow with term and your financial strength, and a lease may claw them back if you default. Ask your accountant how they're treated for tax.
Deposits, guarantees and indemnity
Landlords commonly take a deposit, applied to early rent or held as security; larger deals may use a letter of credit. Small and new companies are often asked for a personal guarantee. It's negotiable: ask for a cap, a release after a period of on-time payment, a limit to the original term, and release on an approved assignment.
The lease will make you indemnify the landlord for claims arising from your use and your people, so read how broad the clause is. You'll commonly carry commercial general liability and contents insurance, with the landlord named as an additional insured.
Use, alterations and restoration
Get a use clause broad enough for how your business may change. Many business types need a municipal business licence in Calgary and Edmonton, and a change of use can require a development permit and a building permit, so ask the municipality during the conditions period. Racking and high storage are fire-code questions and can require permits. For a longer lease, ask your lawyer whether to register a caveat at Land Titles to protect your interest.
At the end, restoration clauses can require you to remove improvements, racking, cabling and signage and repair the damage — sometimes including work the landlord paid for. Agree in writing at the start which items can stay.
Before you sign a warehouse lease
- Confirm with the municipality that your use is allowed in the land use district, and which permits you need
- Get the landlord's additional rent estimate and last year's actual reconciliation
- Ask how the area is measured and whether common areas are included
- Check doors, clear height, power, heat, sprinklers and floor against your operation
- List every inducement: free rent, allowance, landlord's work and fixturing time
- Put the renewal notice window in your calendar the day you sign
- Negotiate any personal guarantee: a cap, a burn-off and a release
- Agree in writing what must be removed or restored at the end
- Review the insurance requirements with your broker before you waive conditions
- Have a lawyer review both the offer and the lease before you sign either
Questions people ask
How long is a typical warehouse lease?
Direct warehouse leases commonly run several years, and small bays are often leased for three to five. Larger or custom-fitted spaces tend to run longer, because both sides need time to recover fit-out costs. Shorter terms are possible but usually come with fewer inducements. Renewal options can add future years without committing you to them now.
What is additional rent in a commercial lease?
Additional rent is what you pay on top of base rent under a net lease: your share of the building's operating costs, property tax, insurance and sometimes a management fee. You pay it monthly on the landlord's estimate, and it's reconciled against actual costs once a year. Ask for last year's reconciliation before you sign so the estimate holds no surprises.
Do I have to sign a personal guarantee for a commercial lease?
Not always, but landlords often ask small or new companies with limited financial history for one. It's negotiable. Common asks are a cap on the amount, release after a period of on-time payment, a limit to the original term, and release if the lease is assigned with consent. Get legal advice before you sign one.
What is a tenant improvement allowance?
It's money the landlord contributes toward your fit-out — offices, washrooms, lighting or power upgrades — in exchange for your lease commitment. It's commonly paid after the work is finished and invoices are provided. The lease may require it to be repaid if you default, and restoration clauses can still apply to the work it paid for, so read both together.
Is GST charged on commercial rent in Alberta?
Generally, yes. Commercial rent in Alberta is generally subject to 5% GST, and Alberta has no provincial sales tax, so GST is the only sales tax on your rent invoices. If your business is registered for GST, ask your accountant how to handle what you pay. The lease should say how GST is added to each payment.
Reviewed 2026-09-30 · General planning guidance · Sources and boundaries