Commercial leases are not consumer contracts. There is no implied warranty of fitness, very little statutory protection, and terms are genuinely negotiable — which cuts both ways. The default draft comes from the landlord's lawyer and is written accordingly.
What "rent" means depends on the structure
| Structure | Tenant typically pays |
|---|---|
| Gross / full service | One rent figure; landlord covers taxes, insurance and maintenance |
| Modified gross | Base rent plus an agreed share of some operating costs |
| Triple net (NNN) | Base rent plus property taxes, building insurance and maintenance |
| Percentage rent | Base rent plus a percentage of sales above a breakpoint; common in retail centres |
A triple net rate and a gross rate are not comparable numbers. Ask for the estimated additional cost per square foot and add it before comparing two spaces, and ask for the last two years of actual figures rather than an estimate.
CAM charges
Common area maintenance covers shared costs — parking, landscaping, lighting, security, management. Three questions decide how much risk you are taking:
- What is included? Ask specifically whether capital expenditure can be passed through. A roof replacement billed as maintenance is a meaningful sum.
- How is your share calculated? Usually pro-rata by floor area. Check the denominator — whether it is leased area or total area changes your share materially when the centre has vacancies.
- Is there a cap? A cap on annual increases in controllable CAM is a common and reasonable ask.
The clauses worth reading twice
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Personal guarantee
This is the clause that undoes the liability protection of your entity. If you sign personally, the landlord can pursue your personal assets for the remaining term. Ask for a limited guarantee instead — capped at a number of months, or burning off after a period of on-time payment.
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Use clause
Defines what you may do in the space. Too narrow and you cannot adapt your business or assign the lease. Negotiate language broad enough to cover plausible evolution.
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Exclusivity
In a multi-tenant centre, prevents the landlord leasing to a direct competitor. Valuable if you can get it, and worth asking about even if the first answer is no.
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Escalation
How rent rises — a fixed percentage, a stated schedule, or an index. Fixed and known is easier to plan around than index-linked with no ceiling.
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Assignment and subletting
Governs whether you can transfer the lease if you sell the business or need to exit. "Landlord's consent not to be unreasonably withheld" is materially better than consent at absolute discretion.
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Repair obligations
Establish who is responsible for HVAC, roof and structure. Tenant responsibility for a unit already near end of life is a common and expensive surprise; ask for its age and service history, and cap your annual exposure.
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Restoration and holdover
Restoration can require you to remove your improvements at the end of the term. Holdover provisions often set penalty rent well above the normal rate if you stay past expiry.
Tenant improvements
A TI allowance is landlord money towards fitting out the space. Whatever is agreed, put the detail in writing: the amount, what it may be spent on, who manages the work, and when it is paid. Allowances are frequently paid on completion, which means financing the work first.
Rent abatement — a period of free or reduced rent while you fit out — is a common alternative or supplement, and is often easier for a landlord to agree than cash.
Contingencies to ask for
Two are worth pressing on for any business that needs permits to operate:
- Zoning and permit contingency — the lease does not commence, or can be cancelled, if you cannot obtain the approvals needed for your use. See zoning.
- Delivery condition — a defined state the space must be in before rent starts, so you are not paying for a space you cannot occupy.
A commercial lease is usually a multi-year financial commitment comparable to a major equipment purchase. Having a lawyer read it before signing is proportionate to what is at stake, and cheaper than the clauses it tends to find.
Questions owners ask
Is commercial rent negotiable?
Generally yes, and not only on the rate. Term length, free rent, improvement allowance, escalation, guarantee scope and exit rights are all commonly negotiated — sometimes more readily than the headline number, which landlords often prefer to hold for valuation reasons.
What is a reasonable term for a first lease?
Shorter terms reduce risk but usually cost more per year and attract smaller allowances. A common compromise is a shorter initial term with renewal options at pre-agreed rates, which keeps flexibility without giving up continuity.
What is usable versus rentable square footage?
Usable is the space you occupy; rentable adds a share of common areas. Rent is normally charged on rentable, so the load factor between them directly affects cost. Ask for both figures.
Where to check
- SBA — pick your business location
- A commercial real estate attorney in your state, and a tenant-side broker