Ontario commercial landlords now face increased liability and risk where they knowingly permit leased premises to be used for certain illegal drug-related activities or knowingly possess proceeds derived from such activities.
In force since July 1, 2026, the Measures Respecting Premises with Illegal Drug Activity Act, 2025 (the “Act”)[1] creates new provincial offences, significant penalties, and expanded law enforcement powers, including granting police authority to make warrantless arrests, restrict access to premises, and evict individuals involved in the production of controlled substances. For commercial landlords, the legislation raises an important practical question: what should a landlord do if it becomes aware of, or suspects, illegal drug activity at its property?
What Are the New Offences and Penalties for Commercial Landlords in Ontario?
The Act prohibits a commercial landlord from:
- Knowingly permitting its premises to be used in relation to a prescribed offence[2] (subsection 2(1) of the Act); and
- Knowingly possessing proceeds obtained from a prescribed offence[3] (section 3 of the Act).
Currently, a prescribed offence is an offence under paragraph 7.1(1)(a) of the federal Controlled Drugs and Substances Act,[4] which relates to possessing, producing, selling, importing, or transporting anything intended to be used to produce a controlled substance.[5]
The potential penalties are significant and underscore the increased responsibilities landlords now face regarding their premises and tenants. For instance, on a first conviction for contravening subsection 2(1) of the Act, an individual may face a fine of between $10,000 and $250,000, imprisonment for up to two years less a day, or both.[6] A corporation may face a fine of between $25,000 and $1 million,[7] and directors and officers may face personal liability where they cause, authorize, permit or participate in an offence committed by a corporation.[8] Subsequent offences can attract substantial daily fines.
The Act also contains broad enforcement powers for police. In certain circumstances, police may seize property and immediately close commercial premises alleged to have been used in committing a prescribed offence.[9] The potential consequences for landlords may therefore extend beyond fines to include disruption to the use and operation of the property.
What Is The “Reasonable Measures” Defence for Commercial Landlords?
The Act allows landlords to potentially avoid liability for non-compliance under subsection 2(1) (knowingly permitting their premises to be used in relation to a prescribed offence) if they can show that reasonable measures were taken to prevent such non-compliance. However, the Act does not yet define “reasonable measures”, and there are no regulations explaining what they include.
Being wilfully blind to the activities of the tenant in the premises will not be a defence.
The reasonable measures defence is not available with respect to section 3 of the Act, leaving landlords vulnerable to liability for accepting proceeds derived from illegal drug-related activities (such as rent payments).
Who is Exempt from Ontario’s Illegal Drug Activity Legislation?
Ontario Regulation 145/26 exempts certain premises from the Act, including those providing homelessness prevention and support services, retirement homes, and long-term care homes.[10] While these exemptions clarify the Act’s application to certain service providers, there is no general exemption for non-profit organizations, which must fall within one of the prescribed exemptions to be excluded.
What Does This Mean for Commercial Landlords?
As noted above, a commercial landlord is not automatically liable under the Act merely because illegal activity occurs on its property – rather, liability arises only where the landlord knowingly permits the premises to be used in connection with a prescribed offence or knowingly accepts proceeds in contravention of the Act.
This leaves important practical questions unanswered, particularly around what, if any, monitoring landlords should undertake and how they should respond if they have grounds to suspect illegal drug activity.
While judicial interpretation will likely be required to determine the scope and extent of the Act, including what constitutes “reasonable measures”, this new legislation makes it important for commercial landlords to consider how their forms of lease and property management practices address suspected illegal activity, including how tenant screenings are done and what rights of inspection and termination they have. Landlords should consider having their existing leases reviewed to ensure they provide appropriate protections and remedies where prohibited activity is suspected.
In the absence of provisions in a lease for the tenant to comply with laws and for the landlord to have rights to inspect or other appropriate enforcement mechanisms, a landlord’s ability to comply with the Act could be problematic.
For more information about the Act, its potential implications for commercial landlords, or to have your lease documentation reviewed, please contact a member of Pallett Valo’s Commercial Real Estate Group.
[1] Measures Respecting Premises with Illegal Drug Activity Act, 2025, S.O. 2025, c. 6, Sched. 8
[2] Ibid at subsection 2 (1).
[3] Ibid at section 3.
[4] Controlled Drugs and Substances Act, S.C. 1996, c.19 (as amended).
[5] O. Reg. 144/26.
[6] Ibid at section 12(1)-(2).
[7] Ibid.
[8] Ibid at section 11(2)
[9] Ibid at sections 4(1) and 7(1).
[10] O. Reg. 145/26.
The author would like to thank Alia Samem, Student-t-Law, for her assistance with this article.