- Model the total occupancy cost, not just base rent.
- Cap or audit operating-expense pass-throughs where possible.
- Make sure the use clause allows your business as it may grow.
- Limit personal guaranties in amount or time.
- Secure renewal options and reasonable assignment rights for an exit or a sale.
A commercial lease is usually a multi-year commitment drafted by the landlord. The rent figure is only part of the cost; escalations, pass-through expenses, repair obligations, personal guaranties, and restrictions on assignment often decide whether the deal works. Most of these terms are negotiable before signing.
1. Rent and escalations
Confirm the base rent, when it increases, and by how much: fixed annual steps or an index. Ask for free-rent periods tied to build-out time.
Check how rent is measured, including whether the square footage includes a share of common areas.
2. Operating expenses and taxes
Many leases pass through a share of real estate taxes, insurance, and common-area maintenance. Ask for the base year, a cap on controllable expense increases, exclusions for capital improvements, and a right to audit the landlord’s calculations.
Unexpected pass-throughs are a common source of disputes.
3. Use clause and exclusives
A narrow permitted-use clause can block new services or a sale of the business. Negotiate a use clause broad enough for how the business may grow.
Retail tenants may also seek an exclusive that prevents the landlord from leasing nearby space to a direct competitor.
4. Repairs, build-out, and condition
Spell out who maintains and replaces the roof, structure, and building systems such as HVAC. Tenants often accept interior repairs but resist responsibility for major systems.
For build-out, define the landlord’s work, any tenant-improvement allowance, the delivery date, and what happens if the space is not delivered on time.
5. Assignment, subletting, and guaranties
Ask that the landlord’s consent to an assignment or sublease not be unreasonably withheld, and that transfers to an affiliate or a buyer of the business be permitted.
If the landlord requires a personal guaranty, negotiate a cap, a burn-off after a period of on-time payments, or a guaranty that ends when the tenant surrenders the space properly.
6. Term, renewal, and default
Renewal options at a stated rent or fair-market formula protect a business that invests in its space. Check notice deadlines for exercising options.
Review default provisions for notice and cure periods, the landlord’s remedies, and any acceleration of future rent. Where a lender is involved, a non-disturbance agreement protects the tenant if the property is foreclosed.
Frequently asked questions
Is a commercial lease negotiable?
Usually. Landlords start with their own form, but rent concessions, expense caps, repair obligations, guaranties, and renewal options are commonly negotiated.
What is a good-guy guaranty?
A limited guaranty, common in New York City, under which the guarantor’s liability generally ends if the tenant gives proper notice, pays rent through move-out, and surrenders the space.
Who pays for repairs in a commercial lease?
Whatever the lease says. Tenants often handle interior repairs while landlords keep the roof, structure, and major systems, but this varies and should be negotiated.
This article is general information, not legal advice, and may not reflect the law in your jurisdiction. Reading it does not create an attorney-client relationship.