What to Look for Before Signing a Commercial Lease

For many small businesses, a commercial lease is the single largest fixed financial commitment they will make for years. And unlike a residential lease, commercial leases are heavily negotiable — and heavily tilted toward the landlord as written. What you accept (or push back on) before signing can mean the difference of tens of thousands of dollars over the term.

Here are the terms worth your attention before you sign.

1. The true cost — not just base rent

The headline rent is rarely the whole story. Look for additional charges like "CAM" (common area maintenance), property taxes, insurance, and management fees. In a "triple net" (NNN) lease, you pay these on top of base rent, and they can rise every year. Make sure you understand your total monthly obligation, not just the base number.

2. Term length and renewal options

A long term gives you stability but locks you in. A short term gives flexibility but less security. The best protection is often a shorter initial term with one or more renewal options at a defined rate — so you control whether to stay without being trapped if the business changes.

3. Rent escalations

Most leases build in annual rent increases. Check how they are calculated — a fixed percentage is predictable; an increase tied to an index can be harder to forecast. Know what your rent will be in year three or five, not just year one.

4. Who pays for what (and what condition you inherit)

Clarify responsibility for repairs and maintenance — especially big-ticket items like HVAC, roof, and structure. Being on the hook to replace a failing rooftop unit can erase a year of savings. If you are getting build-out work or a tenant improvement allowance, get it in writing.

5. Assignment and subletting

If you sell your business or need to move, can you transfer the lease or sublet the space? Many leases restrict this or require landlord consent. A reasonable clause lets you assign or sublet with the landlord's consent "not to be unreasonably withheld."

6. Personal guarantees

Landlords often ask owners to personally guarantee the lease — meaning your personal assets are on the line if the business cannot pay. This is one of the most important terms to negotiate. Options include capping the guarantee, or a "good guy guarantee" that limits your exposure if you leave the space in good order and give proper notice.

7. Exit and default terms

Understand what counts as a default, how much notice you get to fix problems, and what happens if you need to leave early. The time to understand your exit is before you are trying to use it.

The bottom line

Almost everything in a commercial lease is negotiable before you sign — and almost nothing is after. A review before signing is one of the highest-return legal dollars a small business can spend.

This article is for general informational purposes only and does not constitute legal advice. Every situation is different. No attorney-client relationship is created by reading this content. For advice on your specific situation, consult a licensed attorney.