Leasing Your Retail Unit to a Pawnshop or Second-Hand Dealer in Toronto: Licences, Zoning and the Lease

The licence belongs to your tenant. The sign, the back room, the hours and the police access all land on your unit. Here is how to handle each stage of the lease.

I’m Arthur Zhao, a Toronto real estate Broker. Picture a vintage clothing store two years into a five-year lease. Business is fine, and the owner writes to ask whether you would mind a small counter at the back to buy gold jewellery from customers, and maybe offer short loans against watches and rings. It sounds like a minor add-on to the same shop.

It is not. Buying old gold, lending against pledged goods and reselling second-hand stock each sit under their own licence, with their own rules about signs, storage, hours and police inspection. Most of those rules play out inside your unit. This article walks through the lease from the first conversation to the day the tenant leaves, and flags what a landlord should check at each stage.

Before the LOI: find out which business you are actually housing

“Second-hand store” covers several businesses that the law treats very differently. Before any terms are discussed, ask the prospective tenant to describe how money and goods change hands in its shop. Three questions sort most of them:

• Does it lend money against goods? According to the Pawnbrokers Act (Ontario e-Laws consolidation, 2024), a pawnbroker is a person who carries on the business of taking any article by way of pawn or pledge for the repayment of money lent on it (s. 1). That is lending, not retail.
• Does it buy used goods from the public to resell? Chapter 545 requires a licence for every owner of a shop, store or other place for the purchase, sale or exchange of second-hand goods (§ 545-2A(38)), and separately for salvage shops and salvage yards (§ 545-2A(35) and (36)).
• Does it buy old gold or jewellery to melt down? Toronto licenses that as its own trade (§ 545-2A(26)), with its own register and holding rules in Article XXIV.

Then check zoning. Whether a pawnshop, a second-hand store or a gold buyer is a permitted use in that specific unit is a zoning question, and it should be checked on its own rather than assumed from the licence. Confirm it against the zoning that applies to the property before you sign an LOI, not after the tenant has applied for its licence.

One premises fact also matters early. Under § 545-279, if no licensee carried on the business at that location at any point in the previous 12 months, the licence application must come with a certificate from the Medical Officer of Health that the business is unobjectionable on sanitary grounds. A unit that has never housed this kind of business adds a step to the tenant’s timeline, and that affects how you set the fixturing period and the rent start date.

What the provincial Act controls vs what Toronto’s Chapter 545 adds

Drafting the use clause and licensing covenants

The use clause should describe activities, not a shop label. “Retail sale of pre-owned clothing and accessories” tells you what is permitted. “Second-hand store” does not, because it leaves open whether the tenant may buy from the public, take goods in pawn or buy gold for smelting. If you are willing to allow one of those, name it. If you are not, say so expressly, and require your written consent before any licensed activity is added.

This is also the place to deal with the businesses that may not need a licence at all. Chapter 545 defines second-hand goods as including waste paper, rags, bones, bottles, bicycles, automobile tires, old metal and other scrap material and salvage. That wording leans toward scrap and salvage. Whether a vintage clothing or consignment boutique falls inside the second-hand shop category is not settled by the definition alone, so the tenant should confirm it with Toronto Municipal Licensing and Standards. The chapter also exempts dealing in recognized valuable antiques and works of art, and patriotic or charitable purposes (§ 545-275). Write the covenant so it works either way: the tenant obtains every licence the City says it needs, and gives you the City’s answer in writing if it says none is required.

Licensing covenants worth having:

• Obtain all required licences before opening, and keep them in good standing for the whole term.
• Deliver a copy of each licence, and each renewal, to the landlord.
• Notify the landlord promptly of any refusal, suspension or revocation, and treat a loss of licence as a default.
• Comply with the Act and the by-law at the tenant’s cost, including signage, records and inspection access.

Have your lawyer settle the actual wording. The point here is what the clause has to cover, not how to phrase it.

During the term: change of use, inspections and signage

Go back to the vintage store asking about a gold counter. Under a tightly written use clause, that request is a change of use that needs your consent, and you can attach conditions: check zoning for the new activity first, see the new licence before the counter opens, and approve any new signage. The tenant also has to look at where the activity will run. Toronto requires a separate licence for each shop, store or other place used to take in or store second-hand goods (§ 545-280), so moving purchased stock into a storage locker or a second unit in your building is a licensing question, not just a space question.

Inspections are the part landlords tend to forget. According to Toronto Municipal Code Chapter 545 (consolidated to January 1, 2025), Toronto police, and municipal law enforcement officers employed by the Toronto Police Service, may inspect the Second-Hand Goods Register during business hours and may remove it for law enforcement purposes (§ 545-286). Your lease’s tenant-access and security provisions should not get in the way of that. Hours matter too. A pawnbroker cannot operate before 8 a.m. or after 8 p.m. (s. 8(c)). Second-hand licensees are closed between 11 p.m. and 7 a.m., with a midnight extension on Saturdays and the day before a holiday (§ 545-282). If your plaza or building sets operating hours, check that they fit.

Signage is the third item. Chapter 545 allows the second-hand notice over the street door, in the front window, or in another conspicuous place on the front that the Division accepts (§ 545-281). Build that into your sign criteria now, before the tenant puts up something you have to fight about later.

Renewal and exit: what changes when a pawnbroker leaves

A pawnbroker’s licence has to be renewed every year (s. 2(1)). The Act says a pawnbroker’s licence continues while a renewal is pending, as long as the renewal was applied for and the fee paid in time (s. 3(2)). At lease renewal, ask for the current licence, not the one from the first year.

Exit is where a pawnshop differs most from an ordinary retailer. Much of what sits in the shop may be pledges, not the tenant’s own stock. The Act gives pawners redemption rights (ss. 17, 20 to 22), and goods only become the pawnbroker’s absolute property after those periods run out: one year for loans of $15 or less (s. 20), and a notice process for larger loans (ss. 21-22). So before you change the locks or deal with what is left behind, get legal advice. You may be holding other people’s property.

Insurance belongs in the same conversation. If a pledge is destroyed by fire, the pawnbroker still has to pay the pawner its value, less what the pawner owes, with that value set at the sum lent plus lawful interest and charges plus 25 per cent of the sum lent (s. 19(1)), and the pawnbroker has an insurable interest to that extent (s. 19(2)). Ask the tenant to show that its policy covers goods held in pawn, not just owned inventory.

Your file checklist

Three documents, three sets of checks.