Commercial Leases: What to Check Before You Sign

A commercial lease is the agreement under which a business occupies space, and it is normally the longest and least reversible commitment a small business makes. Before signing, check what the total monthly cost really is, how long you are committed and on what terms you can leave, who repairs and insures what, and whether anyone is signing personally. Those four answers matter more than the rent figure on the first page.

Start with the real cost, not the rent

The headline rent is rarely the number you pay. Depending on the structure, the tenant may also carry a share of property taxes, building insurance, common-area maintenance, utilities, management fees and repairs. Ask for the last two or three years of actual operating expenses rather than an estimate, look at how the share is calculated, and check whether any category can jump without limit. A cap on controllable expenses is a common and reasonable ask.

What to check before you sign

• The full monthly cost: base rent plus every additional charge, with the escalation formula for each year of the term.
• The term, the start date, and whether it starts on delivery of the space or on a fixed date.
• Renewal options — how many, at what rent, and by what notice date. Diary the notice date the day you sign.
• The permitted use, and whether it is broad enough for how the business might change.
• Who repairs what: structure, roof, HVAC, glass, plumbing. HVAC in particular is a frequent surprise.
• Improvements: what the landlord is building, what allowance is offered, who owns the improvements at the end, and what must be removed.
• Insurance requirements, and whether the landlord must be named as an additional insured.
• Deposit and any personal guarantee — the amount, the duration, and whether it can be reduced over time.
• Assignment and subletting: whether consent is required and whether it may be withheld unreasonably.
• Exclusivity and co-tenancy, if being the only business of your type in the building matters.
• Parking, signage, access hours, and any building rules attached as an exhibit.
• The condition the space must be returned in, and any restoration obligation.
• What happens if the space is damaged, condemned, or delivered late.
• Default: what counts as one, how much notice you get, and whether you have a right to cure.

The clauses that cause disputes

Operating expenses and escalations

This is where budgets break. Two questions decide most of it: which categories can be passed through, and how is your share calculated. Look for capital items being recovered as if they were maintenance, management fees layered on top of costs that already include them, and a proportionate share calculated against occupied space rather than total space — which quietly increases your share when the building empties. Reasonable protections are a cap on annual increases in controllable expenses, an exclusion list, and a right to see the supporting figures.

Repairs and the HVAC question

Leases often make the tenant responsible for maintaining the systems serving their space, which sounds modest until a rooftop unit fails. Check whether replacement — not just maintenance — falls on the tenant, and negotiate a cap or a landlord obligation for capital replacement. Get the age and condition of the equipment before signing; an inspection at the start is far cheaper than the argument at the end.

Personal guarantees

A personal guarantee steps around the whole point of trading through a company: if the business cannot pay, the individual does. If it is required, negotiate the shape of it — a fixed cap, a rolling limit of a few months' rent, or a guarantee that ends after a period of on-time payments. Also read what triggers it and how long it survives the lease, particularly after an assignment.

Assignment and subletting

This clause determines whether you can sell the business or shrink out of the space. A lease requiring landlord consent is normal; one where consent may be withheld for any reason, or where the landlord may instead take the space back and keep any upside, can make an exit impossible. Ask for consent not to be unreasonably withheld, and for permitted transfers to an affiliate or to a buyer of the business.

A practical order of work

1. Get the full cost per month across the whole term, not year one.
2. Read the exit before the entrance — renewal, assignment, early termination, default.
3. Confirm the physical facts: condition, systems, measured area, delivery date.
4. Negotiate the two or three points that would actually hurt, and let the rest go.
5. Diary every notice date in the document before you file it.

Commercial tenants are generally treated as businesses able to look after themselves, so the protections are the ones you negotiate rather than ones the law supplies. A lease is worth an attorney's time — the fee is small against a multi-year commitment. This guide is general information, not legal advice, and lease law and practice vary by state.