Commercial leases offer fewer legal protections than residential leases and are heavily negotiated. Understanding the terms can prevent costly surprises.
Key terms
- Rent, escalations and who pays taxes, insurance and maintenance (such as net leases).
- Term, renewal options and termination rights.
- Permitted use and exclusivity.
- Security deposit and personal guarantee.
- Assignment and subletting.
- Improvements and who pays for them.
- Default and remedies.
Risks
- Personal guarantees that make you liable beyond the business.
- Long terms with no exit.
- Uncapped operating expense pass-throughs.
- Restrictions on use or signage.
Negotiating tips
- Get a written proposal or letter of intent first.
- Ask for caps on increases and expenses.
- Negotiate renewal options and early termination rights.
- Check zoning and permits before signing.
- Have a lawyer review the lease.
Before signing
Inspect the premises, review building rules and confirm utilities and access. Keep all documents. See our guide to starting a business.
Frequently asked questions
Can I break a commercial lease?
Only as allowed by the lease or law.
What is a triple net lease?
A lease where the tenant pays rent plus taxes, insurance and maintenance.