Buying or Leasing a Restaurant Property: The Build-Out Requirements a Standard Commercial Lease Doesn’t Cover
The lease says restaurant use is permitted. It says nothing about whether the building can physically carry a grease interceptor, an NFPA 96 exhaust shaft, or a commercial kitchen’s electrical load. That gap is where restaurant deals go over budget.
I am leasing a unit that is zoned and permitted for restaurant use — does that mean I can actually build and open a restaurant there?
Not necessarily. Permitted use is a legal answer; whether the space can carry a restaurant is an engineering and licensing answer — and the lease only covers the first. Before opening you must clear at least five requirements that live outside the lease: a grease interceptor required by the municipal sewer-use by-law (Toronto Municipal Code Chapter 681), a commercial exhaust and fire-suppression system built to NFPA 96 under the 2024 Ontario Building Code, written notice to the local Medical Officer of Health before operating a food premise under s. 16(2) of the Health Protection and Promotion Act, electrical and gas work restricted to ESA-notified and TSSA-registered professionals, and separate municipal and AGCO steps for any licensed patio. Each has its own approvals, drawings and inspections — and its own line in your budget.
Source: City of Toronto Sewers By-law (Municipal Code Chapter 681); 2024 Ontario Building Code and NFPA 96; Health Protection and Promotion Act and O. Reg. 493/17, Government of Ontario (accessed July 2026)
I am Arthur Zhao. Here is a pattern I have watched play out more than once in commercial deals: a tenant signs a lease on a promising corner unit, the permitted-use clause says restaurant, the TI allowance sounds generous — and then the mechanical drawings come back. There is no route for an exhaust shaft. There is no room under the slab for a grease interceptor. The electrical service was sized for a clothing store.
None of that was in the lease, because a lease was never designed to answer those questions. This article walks through the five build-out requirements that decide what a restaurant space really costs — and how to translate each one into the two lease levers that protect you: the TI allowance and the fixturing period.
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ℹ️This article uses the City of Toronto’s sewer-use and patio rules as the worked example. Every GTA municipality — Markham, Richmond Hill, Mississauga and the rest — has its own by-laws and numbers. Confirm local requirements with your lawyer, your kitchen designer and the local health unit before committing.
The lease answers permitted use — the codes decide what you must build
A standard commercial lease is very good at three things: rent, permitted use, and allocating repair obligations. It is silent on what the codes will force you to construct once a restaurant fit-out begins. Those requirements sit in the municipal sewer-use by-law, the Ontario Building Code, fire standards and public-health regulations — and since most units are delivered as-is, every one of them quietly becomes your problem. The five below are where restaurant budgets actually break.
Five requirements, ranked by how expensive a surprise they make
The first two are tied to the physical building — inspect for them before you sign. The last three are process and licensing — they set your opening timeline.
The NFPA 96 exhaust system: usually the single biggest line item
In a single-storey pad with roof access above the kitchen, all of this is manageable. In a mixed-use building with residential above, routing that duct is structural surgery — and it is the first thing a mechanical engineer should look at before you sign anything.
🚨The classic deal-killer: a unit in a mixed-use building with residential above and no existing exhaust route. NFPA 96 does not allow the grease duct to share any other building system — and if a shaft cannot be routed at all, no TI allowance fixes that. Put a mechanical engineer on site before you sign, not after.
The grease interceptor: a sewer by-law obligation, not an option
Maintenance is prescribed too: service the unit every four weeks, or before combined grease and solids reach 25 per cent of its liquid volume, whichever comes first — and keep the service records on site for at least seven years. The due-diligence questions before signing are concrete: is there an interceptor in the unit already? Is it sized for your menu? If not, is there physically room — and drainage depth — to put one in?
Public health: notice before you open, and a kitchen built to the regulation
One staffing rule to plan for from day one: s. 32 requires at least one person who has completed food-handler training on the premises during every hour you operate. The health unit inspects against these standards — which makes the location of your hand sinks a drawing-stage decision, not an opening-week one.
Power and gas: capacity first, credentials second
But ask the capacity question before the credentials question: can the existing electrical service and gas metering actually carry your equipment schedule? A service upgrade drags in the utility, the landlord and sometimes common-area infrastructure — a timeline you do not control, which is exactly what the fixturing period exists to absorb.
The patio: three municipal sign-offs before a single drink is poured
And before either track: check whether the patio footprint even sits inside your leased premises. If those tables are on public sidewalk, no lease clause can grant you the right to use that ground — only the municipality can.
⚠️A former restaurant space is not the same as a compliant restaurant space. Equipment may be undersized or past its service life, records may be missing — and the pre-opening notice under s. 16(2) of the Health Protection and Promotion Act follows the operator, so a change of operator means notifying and being inspected all over again. Second-generation space saves some hardware cost; it does not save you the process.
Translating all of this into the lease
Every requirement above is money, time, or both. At the negotiating table they map onto three levers: the TI allowance, the fixturing period, and the line between landlord’s work and tenant’s work.
TI allowance: negotiate the boundary before the number
An interceptor, an exhaust shaft, an upgraded electrical service — these are base-building improvements. They stay with the property when your lease ends, which means they permanently increase the value of the landlord’s asset, not yours. That is your negotiating argument: push building-system work into landlord’s work or have the TI allowance cover it, and keep your own capital for the interior fit-out and the equipment you can actually take with you. The practical method: split the construction budget into two columns — building systems versus interior finishes — and negotiate ownership line by line, instead of haggling over a single allowance number.
Fixturing period: reverse-engineer it from the approvals
Work the timeline backwards: design and permit drawings, building-permit review, ESA and TSSA regulated work with inspections, the health unit’s pre-opening inspection, fire approval of the suppression system, and AGCO processing if alcohol is involved. Each step can stall, and few of them run in parallel. Two clauses matter as much as the length itself: when the fixturing period starts (on permit issuance or on key delivery — very different outcomes), and what happens if a permit simply does not arrive — negotiated extension rights beat pleading after the fact. A fixturing period long enough for a paint-and-carpet retail fit-out is not an answer for a restaurant that needs a new exhaust shaft.
💡 Bottom line: for restaurant and QSR space, due diligence has to reach past the lease document and into the building itself. Before signing, answer five questions — is there room and drainage for a grease interceptor, can an NFPA 96 duct get out of the building, how far is the kitchen from O. Reg. 493/17 hardware standards, can the power and gas carry your equipment schedule, and who controls the patio ground? Then let the TI allowance and the fixturing period be negotiated off that list. The codes will not move — the only things that can move are your budget and your opening date.
Frequently Asked Questions
The unit was a restaurant before — do I still have to go through all of this?
The process items, yes; the hardware, it depends on condition. Under s. 16(2) of the Health Protection and Promotion Act, the pre-opening notice attaches to the operator — so as a new operator you notify the health unit and get inspected regardless of what the previous tenant did. Existing hardware such as the interceptor and the hood-and-duct system can be reused if compliant and well maintained. In Toronto, grease-interceptor service records must be kept on site for seven years — those records are your best due-diligence evidence of how the space was actually run.
How often does a grease interceptor have to be serviced in Toronto?
For a standard hydromechanical interceptor, the City requires service every four weeks, or before combined grease and solids reach 25 per cent of the liquid volume — whichever comes first (City of Toronto, Sewers By-law code of practice). Records — service contracts, invoices or self-maintenance logs — must stay on site for at least seven years and be available to City inspectors on request.
Who do I have to notify before opening a food business in Ontario?
The local Medical Officer of Health — before you start operating. That is s. 16(2) of the Health Protection and Promotion Act, and O. Reg. 493/17, s. 5 requires the notice to include your name, contact information and the premise location. Expect an inspection against the regulation’s hardware standards (handwashing stations, utensil-washing equipment), and remember s. 32: at least one trained food handler or supervisor must be on site during every operating hour.
Can I make the landlord pay for the grease interceptor and the exhaust system?
Sometimes — and the argument is stronger than most tenants realize. These are building-system improvements that stay with the property after your lease ends, so they permanently add value to the landlord’s asset, not yours. That is the case for putting them into landlord’s work or covering them from the TI allowance. Whether you win depends on leverage and the unit’s condition — but you cannot win a negotiation you never itemize. Split building systems from interior finishes and negotiate each line.
What extra approvals does a licensed patio need?
Two tracks. The municipality governs the patio itself — public-sidewalk or boulevard patios generally need their own municipal permit or agreement, and rules vary by city. For the liquor licence, the AGCO requires the municipal compliance letters — building, fire and public health — to specify that the outdoor area was inspected. And check the lease first: if the patio footprint sits outside your leased premises, secure the right to use that ground before spending anything on licensing.
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