Leasing Retail Space to a Pharmacy in Ontario: Accreditation, Rent Terms and Lease Clauses

A pharmacy signs the same kind of retail lease as anyone else, but several of its clauses are shadowed by rules written for pharmacists and physicians. Here is where those rules land on the landlord.

Percentage rent, where the rent climbs as the tenant’s sales climb, is one of the most ordinary clauses in a retail lease. A landlord offers it to a clothing store or a café without a second thought. Put a pharmacy in the same unit and put a doctor on the landlord side, whether the doctor personally, a family member, or a company the doctor controls, and that ordinary clause stops being a commercial choice. Ontario’s physician regulation says a doctor who rents premises to a pharmacy they send patients to must charge rent that is not related to the volume of business the tenant does there. A sales-based rent is exactly that.

I’m Arthur Zhao, a broker with AZ Real Estate Partners. A pharmacy lease is mostly a normal retail lease, but almost every major clause has a regulatory rule sitting behind it, and most of those rules were written for the tenant or for doctors, not for you. Below I walk the lease in the order you would actually draft it, and at each clause point out which rule is in the background and what it means for the landlord.

The lease, clause by clause

The statute that governs pharmacies is the Drug and Pharmacies Regulation Act (DPRA), with its general regulation, O. Reg. 264/16. Physicians are covered by the Medicine Act, 1991 regulations. None of these laws is addressed to landlords, so nothing below is a duty you personally owe the College. It is about drafting a lease that does not collide with the duties your tenant, or you as a physician, already carry.

Tenant entity: who signs, and who holds the certificate

Under DPRA s.144(1), only a pharmacist, or a corporation that meets s.142, may own or operate a pharmacy. For a corporation, s.142 requires two things: a majority of the directors must be pharmacists (s.142(1)), and a majority of each class of shares must be owned by and registered to pharmacists or to health profession corporations holding a certificate of authorization from the College (s.142(2)). There are narrow carve-outs: shares held by a deceased pharmacist’s personal representative count for up to four years (s.142(3)); corporations operating a pharmacy on May 14, 1954 are exempt from the share rule (s.142(4)); and the section does not apply to a non-profit corporation providing health services by members of more than one health discipline (s.142(5)). Since January 1, 2026, s.142(6) and s.144(3) also say that “pharmacist” in these two sections does not include persons the regulations prescribe, so not every registered pharmacist necessarily counts.

Why this matters to you: according to O. Reg. 264/16 s.11(1), the certificate of accreditation is issued “in the specific name of the person who owns the pharmacy.” The tenant named on your lease and the owner named on that certificate should be the same entity. If a holding company signs the lease and a different operating company holds the certificate, you have a tenant that cannot lawfully run the business it promised to run in the use clause. The pharmacy must also have a pharmacist designated manager appointed by the owner and filed with the College (DPRA s.146(1)(b), (1.1)), which gives you a named professional to ask about.

Condition precedent: what if the certificate has not been issued yet

DPRA s.139(1) is blunt: no one may establish or operate a pharmacy unless a certificate of accreditation has been issued for it. The Registrar of the Ontario College of Pharmacists issues it when the applicant, the pharmacy and its proposed operation qualify (s.139(2)); applications the Registrar proposes to refuse, or to issue with conditions, go to the Accreditation Committee. A pharmacy that will sell drugs by retail applies for the community pharmacy class (O. Reg. 264/16 s.7(3)), and under s.8(2) the certificate is issued only once the Registrar or Committee is satisfied the pharmacy meets the accreditation standards. Those standards are about the physical premises, which the tenant can only build out after it has your space.

So the timing is circular: the tenant needs the unit to qualify, and needs the certificate to open. A lease can deal with that by making the certificate a condition, with a date by which it must be obtained and a stated consequence if it is not, and by deciding who bears rent during the gap between possession and opening. Zoning is a separate question. I have not reviewed any municipal by-law for this piece; the lease should simply say that the tenant obtains its own zoning confirmation before opening and who carries the risk if it cannot.

Once open, the certificate expires every May 10 unless renewed on or before that date (O. Reg. 264/16 s.13(1)). A covenant to keep the certificate in good standing, with a copy of each renewal delivered to you, costs the tenant nothing.

Use and signage

The permitted use clause usually names the business. Here the name itself is regulated. DPRA s.147 forbids any retail business from using 14 listed designations, in English and French, including “Drug store,” “Pharmacy,” “Drug mart,” “Drugs” and “Medicines,” unless the business is an accredited pharmacy. That has two practical consequences for the landlord: pylon or directory signage reading “Pharmacy” should not go up before the certificate exists, and no other tenant in your plaza can use those words unless it is itself accredited.

The signage clause also has to make room for a sign the tenant does not choose. Under O. Reg. 264/16 s.19(j), every pharmacy must display the College’s trademarked symbol, unaltered, so it is easily visible to patients or the public before or immediately after entering. If your sign criteria restrict logos or window graphics, carve this one out.

Access belongs here too. DPRA s.148(1) lets a College inspector enter any pharmacy at all reasonable times, and s.148.4 says no person shall obstruct an inspector. Your landlord’s entry clause governs your access; it cannot limit theirs.

Fixturing and alterations

Most of the accreditation standards in O. Reg. 264/16 s.19 are about the premises, which means they show up in the tenant’s fixturing plans and in your alterations consent. The pharmacy must be designed, constructed and maintained to ensure the safe and appropriate storage of drugs (s.19(c)), and be secure and safeguarded from unauthorized access (s.19(e)). A community pharmacy must have a dispensary that is designed, constructed and maintained so the public cannot access it (s.22(1)).

Expect a request for lock and leave. DPRA s.146(2) allows the rest of the store to stay open without a pharmacist physically present, as long as the drugs are restricted to a part of the pharmacy the public cannot access and that part is not in operation. O. Reg. 264/16 s.23 then requires the public to be completely restricted, by physical impediments, from any Schedule I, II or III drugs. In lease terms, that is a permanent partition, gate or enclosure inside your unit. Decide in the lease whether it stays as a leasehold improvement or is removed at the end of the term, and who restores the space.

Rent

This is the clause where the landlord’s own identity matters most.

If you are not a physician and no physician family member or physician-controlled company is on the landlord side, the physician regulation does not apply to you. The rules that touch rent are your tenant’s. O. Reg. 264/16 s.34 lists conflicts of interest for a pharmacy’s owner or designated manager, including conferring a benefit on someone because a patient was referred to the pharmacy (item 2) and entering any arrangement that influences or encourages, or appears to influence or encourage, a prescriber to promote the pharmacy (item 4). Section 35(2) then says that paying rent for premises leased to operate a pharmacy is not a conflict under s.34 “if the rent reflects the normal rent payable for the same type of premises in the same geographical area.” That is a safe harbour for the tenant, not a requirement that the rent be any particular number. Individual pharmacists have the same safe harbour in O. Reg. 130/17 s.7(3).

If the landlord side includes a physician, the test changes. According to O. Reg. 114/94 s.16(b), it is a conflict of interest for a physician, a member of the physician’s family, or a corporation wholly, substantially or actually owned or controlled by either, to rent premises to a supplier the physician refers patients to, or to a supplier that sells or supplies medical goods or services to the physician’s patients. A pharmacy is a “supplier” under that regulation. The only exception requires both conditions at once: (iii) the rent is normal for the area, and (iv) the amount of the rent is not related to the volume of business the tenant carries on in the premises. Meeting one is not enough. A doctor who is in a conflict of interest has committed professional misconduct under O. Reg. 856/93 s.1(1), item 5. “Member of his or her family” is defined in s.15 of O. Reg. 114/94 by blood, marriage or adoption, so if your spouse or sibling is a physician, premises you own can put that physician in this position.

Separately, s.16(a) makes it a conflict for the physician side to receive any benefit, directly or indirectly, from such a supplier. Rent-free periods, inducements and side payments in the lease should be read with that in mind.

Three regulations, three different audiences

Assignment and sublet

In most retail leases, assignment is a credit question: is the new tenant as good as the old one? With a pharmacy, it is also a licensing question. Because O. Reg. 264/16 s.11(1) issues the certificate in the specific name of the owner, a sale of the pharmacy business to a new owner does not carry the old owner’s certificate with it. The buyer has to qualify in its own right under DPRA ss.142 and 144 and go through the College. I have not checked the College’s procedure, timing or fees for a change of ownership, so I will not describe them here; ask the tenant’s lawyer or the College.

For a corporate tenant, a share sale is the less obvious version of the same issue. If the buyer of the shares is not a pharmacist, the corporation may stop meeting s.142’s majority rules. That is the tenant’s compliance problem, but it is your problem too if the use clause requires an accredited pharmacy. Change-of-control language that requires notice to you is how you would find out.

Surrender and closing

Ending a pharmacy tenancy has steps an ordinary surrender does not. DPRA s.141 requires anyone who permanently closes a pharmacy to immediately remove all signs and symbols relating to the practice of pharmacy, inside and outside the premises; remove and dispose of all drugs according to law; and report in writing to the Registrar as the College’s by-laws require. A permanent closure also deems the certificate expired (O. Reg. 264/16 s.13(2)).

Patient records outlive the store. O. Reg. 264/16 s.21 requires documents relating to a patient’s care to be kept for at least 10 years after the last recorded pharmacy service, or until 10 years after the patient turned or would have turned 18, whichever is longer. Your surrender and holdover clauses should require the tenant to remove drugs and records itself, and should be clear about what happens to fixtures like the dispensary enclosure.

Before you sign

Two short lists: what to get from the tenant, and what to ask about yourself.