What to Look for in a Commercial Lease: A Tenant's Checklist

1. Base Rent and Escalation Clauses

The base rent is obvious — it's the headline number. What most tenants miss is the escalation method: how rent increases each year.

Common escalation structures include:

• Fixed increases: "Rent increases 3% each year." Simple and predictable.
• CPI-indexed: Rent rises with inflation (Consumer Price Index). In a high-inflation environment, this can mean 7–9% increases you didn't anticipate.
• Negotiated step-ups: Pre-agreed rent schedule (Year 1: $25/sqft, Year 2: $26/sqft, etc.). Favorable because both parties know exactly what's coming.

Calculate your total rent obligation over the full lease term — not just Year 1. A 5-year NNN lease at $25/sqft with 4% annual escalations costs significantly more by Year 5 than the headline suggests.

2. CAM Charges and Operating Expense Pass-Throughs

Common Area Maintenance (CAM) charges are additional costs beyond base rent that cover property maintenance, insurance, property taxes, and building expenses. In a NNN lease, these pass-throughs can add $5–15/sqft to your effective rent — a number that changes every year.

The most important CAM question: is there a cap?

• Controllable CAM cap: A limit on how much controllable expenses (management fees, maintenance, landscaping) can increase per year — typically 3–5%. This is what you want.
• Non-controllable expenses: Insurance, taxes, and utilities are usually excluded from caps because the landlord can't control them. This is standard.
• Audit rights: The right to audit CAM reconciliations annually. Always push for this — landlords sometimes overcharge, and without audit rights you have no recourse.

3. Lease Type: Gross, NNN, and Modified Gross

The lease type determines who pays what beyond base rent. This fundamentally changes your total occupancy cost.

• Gross lease: Tenant pays base rent only. Landlord covers taxes, insurance, and maintenance. Simpler and more predictable for the tenant — you know your total cost.
• Net / NNN lease: Tenant pays base rent plus a proportionate share of taxes, insurance, and CAM. Costs vary year to year. Requires more due diligence on what the "NNN" actually includes.
• Modified gross: A hybrid. Some expenses (often utilities) pass through to the tenant, others don't. Read carefully to understand exactly which expenses you're responsible for.

The lesson: the base rent number alone is not your cost. In a NNN lease, always ask the landlord for the last 3 years of CAM reconciliation statements before signing. This shows you what "CAM" has actually cost recent tenants in that space.

4. Renewal Options

A renewal option gives you the right to extend the lease at the end of the term. This protects you from being forced to move — or negotiate from scratch at a market peak — when your lease expires.

Key questions to ask about renewal options:

• How much notice is required to exercise? Typically 6–12 months before expiration. Missing this window — by even one day — can forfeit the option permanently.
• How is the renewal rent set? "Fair market value" sounds reasonable but means a new negotiation. "At the same rent plus 3%" is much better for you.
• How many options do you have? One 5-year option is standard; two options is better if you expect long-term occupancy.

5. Personal Guarantee

If your business is an LLC or corporation, a personal guarantee means the landlord can come after your personal assets — your home, savings, personal bank accounts — if the business defaults on the lease. This is the highest-risk clause in most commercial leases.

What to negotiate:

• Burn-off provision: The guarantee reduces or terminates after you've demonstrated reliable payment. Common burn-offs: 50% after Year 2, 100% eliminated after Year 3. If the lease doesn't have one, ask for it.
• Capped guarantee: Limit the guarantee to a fixed dollar amount (e.g., 12 months of rent) rather than the full remaining lease term obligation.
• No guarantee: Increasingly possible for well-capitalized businesses with strong financials. Landlords will sometimes accept a security deposit in lieu of a personal guarantee.

6. Holdover Provisions

A holdover clause governs what happens if you stay in the space after your lease expires without signing a new lease. This is more common than you'd think — lease negotiations take time, and tenants often stay month-to-month while working out renewal terms.

Typical holdover provisions charge 125–200% of the last month's base rent for every month you overstay. Some go higher. This is often overlooked because tenants assume they'll move out on time — but construction delays, new lease negotiations, and timing issues make holdover more common than expected.

7. Permitted Use and Exclusivity Clauses

The permitted use clause defines what your business is allowed to do in the space. A narrow definition can prevent you from pivoting your business, adding a product line, or subletting to a compatible business later.

An exclusivity clause prevents the landlord from renting to a direct competitor in the same property. This is critical for retail tenants — if you're a coffee shop, you don't want the landlord to open a second coffee shop two doors down.

• Negotiate permitted use language that's broad ("retail sales of food and beverage products and related services" rather than "coffee shop only").
• If exclusivity matters to your model, get it in writing — and define the protected category specifically.

8. Subletting and Assignment Rights

Your right to sublet (rent part of your space to another tenant) or assign (transfer the entire lease to another party) is often heavily restricted in landlord-favorable leases. Without these rights, you're locked in regardless of what happens to your business.

What to look for:

• Landlord consent standard: "Not to be unreasonably withheld" is much better than "at landlord's sole discretion."
• Profit-sharing on sublet: Some leases require you to share any profit above your rent if you sublet at a higher rate. Push to keep 100% or limit this to 50%.
• Assignment in M&A context: If you sell your business, can the buyer assume the lease? Make sure the lease doesn't require landlord consent for a sale of the company.

9. Early Termination Rights

An early termination option (also called a "kick-out clause" or "exit right") lets you end the lease before the expiration date — usually with notice and a termination fee. Without one, you're liable for the full remaining term even if your business circumstances change dramatically.

Typical structures:

• 6–12 months written notice required
• Termination fee equal to 3–6 months of base rent (or unamortized TI allowance + leasing commissions)
• Option may only be exercisable after a certain date (e.g., not before Year 3 of a 7-year lease)

Many landlords will resist this — especially for shorter leases — but it's worth asking. For longer leases (7+ years), an early termination right is increasingly standard.

10. Tenant Improvement Allowance (TIA)

A Tenant Improvement Allowance (TIA) is money the landlord contributes toward building out or improving the space for your use. This can range from nothing to $50–100/sqft in competitive markets. It's a critical part of your total deal economics.

Key points:

• Who manages the work? Landlord-managed TI is common but means you have less control over contractors and timeline. Tenant-managed TI (with landlord approval) gives you more flexibility.
• What can the TIA be used for? Some allowances exclude soft costs (architecture, permits). Make sure your allowance covers what you actually need.
• Improvements are usually landlord's property: Anything permanently attached to the space reverts to the landlord at lease end. Confirm whether you're required to restore the space to original condition — this can be expensive.

11. Landlord Relocation Rights

Some commercial leases give the landlord the right to move you to a "comparable" space within the property with as little as 30–60 days notice. This sounds unlikely, but it happens — especially in multi-tenant office buildings where landlords want to consolidate tenants to free up a larger block of space for a bigger tenant.

12. Key Dates and Notice Deadlines

Commercial leases are full of dates with real consequences for missing them. These deadlines are buried in different sections and easy to lose track of over a multi-year lease term.

Critical dates to extract and calendar immediately:

• Lease commencement and expiration dates
• Renewal option exercise deadline (often 6–12 months before expiration — missing it forfeits the option)
• Early termination notice deadline (if you have this right)
• Rent escalation dates (when does the next step-up take effect?)
• CAM reconciliation and audit deadline (typical audit window is 90–180 days after landlord provides annual statement)
• Security deposit return deadline
• Required restoration completion date (if required at end of lease)

Put every one of these in your calendar with a 30-day and 90-day advance reminder. Missing a renewal option exercise deadline by a day has cost tenants their space.

Putting it all together

A commercial lease is a legal document written by landlord's counsel to protect the landlord. Every clause that isn't negotiated defaults to landlord-favorable terms. The good news: most of what's listed above is negotiable — especially in markets where landlords are competing for tenants.

The practical approach for any lease:

1. Run a full analysis before you negotiate (know what you're actually signing)
2. Identify the 3–5 highest-risk clauses and prioritize those in negotiation
3. Use specific language — "I'd like to add a 3% annual cap on controllable CAM increases" is more productive than "I'm worried about CAM costs"
4. Have an attorney review before signing any multi-year lease — the analysis pays for itself in one avoided mistake

LeaseLens can handle step one — and give you the specific language for step three.