Commercial lease
IN PLAIN ENGLISH

Defines exactly what space you're leasing — the square footage, suite number, common areas you can access, and parking — and what you're allowed to do there. The use clause matters: if you sign a lease for "general office use" and later want to add a retail component or food service, you may need landlord approval or a lease amendment. Some use clauses are exclusive, preventing the landlord from leasing to a competing business in the same building.

The start date, end date, and any options to extend. Renewal options typically must be exercised in writing within a notice window (often 6-12 months before the term ends) and may specify the renewal rent in advance or tie it to fair market value or a fixed escalation. If you fail to exercise on time, you lose the option.

The starting rent (usually quoted per square foot per year) and how it increases over time. Escalations can be fixed (e.g., 3% per year), tied to CPI (consumer price index), or adjusted to "fair market value" at specified intervals. Predictable escalations are better for planning; FMV resets expose you to bigger jumps if the market rises.

In a net lease, the tenant pays a share of the building's operating expenses — property taxes, insurance, maintenance, and common area costs (CAM). The lease should specify what's included, how your share is calculated (usually pro-rata by square footage), whether there's a cap or base-year stop, and when you get an annual reconciliation. Uncapped operating expenses can turn a seemingly affordable rent into a budget-breaker.

Commercial leases often require several months' rent as a security deposit, plus a personal guarantee from the business owner if the tenant is a newly formed LLC or corporation. A personal guarantee makes you personally liable for the lease obligations if the business can't pay — essentially putting your personal assets on the line. Negotiating a limited or "burn-off" guarantee (one that expires after a few years of timely payment) is critical if you can get it.

Who pays for the initial construction or customization of the space — walls, flooring, HVAC, fixtures — and who owns it at the end of the lease. Landlords often contribute a tenant improvement allowance (TIA), expressed as dollars per square foot, toward build-out costs. The lease should clarify the approval process, the timeline, and whether you can take any improvements with you or must restore the space to its original condition.

Allocates responsibility for keeping the space in working order. In a gross lease, the landlord typically handles most repairs; in a triple-net lease, the tenant is responsible for everything inside the premises and sometimes the roof and structure. Who fixes the HVAC, plumbing, electrical, and exterior — and how fast — should be explicit.

Whether you can transfer your lease to another business (assignment) or rent out part of your space (subletting) without landlord consent. Most commercial leases prohibit assignment and subletting without approval, which the landlord may withhold at its discretion. If you might need flexibility — to downsize, merge, or sell the business — negotiate for a right to assign with reasonable approval standards.

Defines what counts as a default (non-payment, breach of covenants, bankruptcy), what notice and cure periods you get, and what the landlord can do if you don't fix the problem. Landlord remedies typically include eviction, acceleration of rent (making the full remaining lease balance due immediately), and recovery of re-letting costs. The more tenant-friendly the default clause, the more time and protection you have if things go wrong.

Whether you can end the lease before the term is up, and at what cost. True termination rights are rare in commercial leases; when they exist, they usually require significant notice (6-12 months) and payment of a termination fee (often several months' rent). If business conditions are uncertain, negotiating a break clause can be worth more than a lower rent.

What happens if you stay past the end of the lease without renewing. Commercial holdover clauses are often punitive — rent may jump to 150-200% of the prior rate, and the landlord may have the right to evict immediately. Know the deadline to renew or vacate.

Requires the tenant to carry commercial general liability, property insurance, business interruption insurance, and sometimes umbrella coverage, with specified minimums. The landlord will want to be named as an additional insured and may require a waiver of subrogation (preventing your insurer from suing the landlord). Review with your broker before signing.

A provision that lets the landlord move you to a different space in the building, usually with notice and at landlord's expense. This is common in larger office buildings and protects the landlord's ability to consolidate floors for bigger tenants. If your location matters (retail frontage, for example), negotiate limits or remove this clause.

Retail leases may include co-tenancy clauses — the right to pay reduced rent or terminate if anchor tenants leave the shopping center — and exclusivity clauses — a promise that the landlord won't lease to a competing business. These are valuable protections but often heavily negotiated.