Commercial Lease Review Checklist: 25 Things to Check Before Signing

These two dates can differ by weeks or months. The lease commencement date marks when your legal obligations begin (insurance, maintenance, etc.). The rent commencement date is when you actually owe money. If you negotiate a free rent period of 3 months, make sure the rent commencement date reflects this — and that it's in writing.

Rent escalations are how landlords maintain rent at or above market over the lease term. They come in three forms: fixed percentage (e.g., 3% annually), CPI-indexed (tied to inflation), or fixed dollar step-ups. A 3% annual bump sounds modest, but on a 10-year lease with $10,000/month starting rent, you'll be paying $13,439/month by year 10 — a 34% increase.

Common Area Maintenance (CAM) charges are what tenants pay toward shared expenses — lobbies, parking lots, landscaping, roof, HVAC for common areas, property management fees. CAM is often estimated at lease signing and reconciled annually. Without a cap, your CAM can increase dramatically year over year. With a controllable CAM cap (typically 5–8% annually), you have predictable exposure.

In NNN and modified gross leases, tenants pay a share of the building's operating expenses — property taxes, insurance, and maintenance. Landlords estimate these at the start of the year and collect monthly. At year-end, actual expenses are compared against estimates and you receive a bill or credit. If the reconciliation process isn't defined, you have no protection against audit delays, inflated charges, or incorrect expense allocations.

Security deposits for commercial leases range from one month to 12+ months of base rent depending on the tenant's financial strength and the landlord's risk appetite. More important than the amount is the return condition: what triggers a deduction, how quickly it must be returned after lease expiration, and whether you can replace cash with a letter of credit.

If a building is only 60% occupied, the actual costs of cleaning, utilities, and maintenance for common areas are lower than they would be at full occupancy — but those costs don't scale perfectly with occupancy. A gross-up provision allows landlords to "gross up" variable operating expenses to 95–100% occupancy for the purpose of calculating your pro-rata share. This means you could pay more than your true share of actual costs during low-occupancy periods.

A TI allowance is money the landlord provides for buildout. It sounds like free money but often has strings: it may be amortized into your rent at above-market interest rates, you may owe unamortized amounts back if you terminate early, and there may be a time limit (e.g., must be spent within 12 months of lease commencement) that could force you to rush construction decisions.

The permitted use clause defines what you can legally do in the space. If it's too narrow, you can't adapt your business model. If it's too broad, a co-tenancy clause or exclusivity in favor of another tenant might not cover you. The clause should describe your core business broadly enough to accommodate natural evolution — not just your business as it exists today.

Assignment (transferring your entire lease to a new tenant) and subletting (leasing part of your space to another party) are critical exit and flexibility tools. Many leases require landlord consent, which is standard — but "reasonable consent" is very different from "sole and absolute discretion." Also watch for recapture rights, where the landlord can take back the space rather than approve your subtenant.

What happens if you're late on rent? If you violate a lease term? Default provisions define what constitutes a breach, how quickly the landlord can act, and how long you have to fix the problem. Typical cure periods: 5 days for monetary defaults, 30 days for non-monetary defaults (with extension if cure is diligently underway). Short or absent cure periods leave you exposed.

Landlords of commercial space almost always require personal guarantees from business owners and principals, especially for new or small businesses. A full lease guarantee means your personal assets are on the hook for the entire remaining rent obligation if your business fails. Negotiate the guarantee to be limited in amount, time, or both — and push for a burn-down provision that reduces personal exposure as your payment track record improves.

Commercial leases typically require tenants to carry Commercial General Liability (CGL), property insurance, and sometimes workers' compensation, umbrella, and business interruption coverage. Requirements vary significantly. Having insufficient insurance is a lease default. Having more coverage than required is simply a cost you can potentially reduce.

If you stay in the space past your lease expiration without signing a renewal, you become a holdover tenant. Holdover rent is typically 125–200% of your last month's base rent, sometimes more. Some leases make you liable for consequential damages (e.g., if the landlord had another tenant lined up). Understand the holdover penalty so you can plan your exit or renewal timeline accordingly.

HVAC maintenance is a common source of lease disputes. In many retail and industrial leases, tenants are responsible for maintaining — or even replacing — the HVAC unit. A full HVAC replacement can cost $15,000–$50,000+. If the lease says "maintain and repair HVAC in good working order," that's a potential capital obligation on your balance sheet. Negotiate to put a cap on HVAC repair obligations or require the landlord to warranty existing equipment.

Many office leases provide HVAC during standard business hours (typically 8 AM–6 PM, Monday–Friday) and charge separately for after-hours use. Rates range from $20–$100+ per hour. If your business operates evenings or weekends, these charges add up fast. Negotiate a reasonable after-hours rate and confirm the hours before signing.

Don't assume parking is included. Many urban and suburban office leases separate parking from base rent. The number of reserved vs. unreserved spaces, monthly cost per space, and whether parking is guaranteed (or merely "available") all matter. For retail tenants, understand if the parking ratio meets your customer volume needs.

Signage can be critical for retail and customer-facing businesses. Many leases heavily restrict signage — size, location, materials, lighting, and approval process. Confirm you have the right to install the signage you need and that your approval process is reasonable. Monument signage on the property and building-top signage are often reserved for anchor or major tenants.

Can you make alterations to the space without landlord approval? What approval is required for major vs. minor changes? And at lease-end, what happens to the improvements you've made — do they stay with the building, or are you required to remove them and restore the space? Restoration obligations can be surprisingly costly, especially for technology infrastructure, millwork, or built-out conference rooms.

A renewal option gives you the right to extend the lease at pre-agreed terms. The exercise window — typically 6–12 months before expiration — is a hard deadline. Miss it and the option lapses; you're at the landlord's mercy for terms. Renewal rent is often "fair market value" with no cap, which can mean a dramatic rent increase in a hot market. Push for a defined rent formula (e.g., 95% of FMV with a floor and ceiling).

If expansion is a possibility, a Right of First Refusal (ROFR) or Right of First Offer (ROFO) on adjacent space gives you priority access before the landlord leases it to another tenant. ROFO (landlord must offer to you first at their asking terms) is more landlord-friendly. ROFR (you can match any third-party offer) is more tenant-friendly. Either provides meaningful optionality for growing businesses.

If you're a retail tenant, co-tenancy protections are critical. A co-tenancy clause gives you rent relief or even termination rights if anchor tenants vacate or if overall occupancy falls below a threshold (typically 70–80%). Without this protection, you could be stuck paying full rent in a dead mall or shopping center that has lost its traffic drivers.

For retail tenants, exclusivity prevents the landlord from leasing to direct competitors within the same property. Exclusivity language should define your business category specifically (not too broadly, which is unenforceable, and not too narrowly, which leaves gaps). Also check whether existing tenants already have exclusivity that could restrict your permitted use.

An early termination clause gives you the contractual right to exit the lease before expiration, typically by paying a termination fee and providing advance notice (usually 6–12 months). Without one, you can only exit by negotiating with the landlord, assigning, or defaulting — all of which are more costly and uncertain. Termination fees typically include unamortized TI allowance, unamortized broker commissions, and a cash penalty equal to 3–6 months of rent.

If the landlord has a mortgage on the property, your lease is likely subordinate to that mortgage — meaning if the landlord defaults on their loan, the lender could foreclose and terminate your lease. A Non-Disturbance Agreement (NDA or SNDA) protects you: as long as you're not in default, the lender agrees to honor your lease through a foreclosure. This is critical protection that many tenants never think to request.

What happens if the building burns down or the government condemns part of the property for a road expansion? Casualty provisions define the landlord's obligation to rebuild and your rights if rebuilding takes too long (typically, a right to terminate if restoration exceeds 180–270 days). Condemnation (eminent domain) provisions address what happens to your lease and rent if the government takes part of your premises.