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Sample lease: 5-year NNN retail lease · 2,400 sq ft coffee shop · Austin, TX · Tenant: Blue Sky Coffee Co., LLC
D

Landlord-Favorable Lease — Significant Risks

Three high-severity risk flags: uncapped CAM, full-term personal guarantee with no burn-off, and no early termination right. Negotiation required before signing.

28 / 100 tenant score
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Plain-English Summary

This is a 5-year retail lease for approximately 2,400 square feet in a strip mall in Austin, Texas. The lease is structured as a Triple Net (NNN) lease with uncapped CAM charges and a full-term personal guarantee — both significant risk factors. Base rent is $3,200/month escalating 3% annually. The lease type means you pay base rent plus your proportionate share of property taxes, insurance, and all maintenance costs with no annual limit on increases.

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Rent Schedule

YearMonthly RentAnnual RentEst. CAMTotal / Month
Year 1$3,200$38,400~$800~$4,000
Year 2$3,296$39,552~$800+~$4,096+
Year 3$3,395$40,740Unknown~$4,195+
Year 4$3,497$41,964Unknown~$4,297+
Year 5$3,602$43,224Unknown~$4,402+

CAM marked unknown in years 3–5 because this lease has no cap — increases are unlimited. Total estimated occupancy cost: ~$252,000–$264,000 over 5 years.

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Key Lease Terms

Lease TypeTriple Net (NNN) — tenant pays base rent + taxes + insurance + CAM
Term5 years — March 1, 2024 to February 28, 2029
Security Deposit$9,600 (3 months base rent) — refundable, returned within 30 days
CAM CapNone — fully uncapped. High risk.
Renewal OptionOne 5-year option at fair market value (landlord-determined)
Renewal NoticeMust exercise by May 31, 2028 — 9 months before expiration
Early TerminationNo early termination right under any circumstances
Holdover Rate150% of last month's base rent (~$4,800/month)
SublettingPermitted — landlord consent not unreasonably withheld
AssignmentLandlord's sole discretion — may be withheld for any reason
Personal GuaranteeFull 5-year term, no burn-off. Guarantor: James R. Mitchell
ExclusivityNone — landlord can lease to competing coffee concepts
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Risk Flags

HIGH RISK
Uncapped CAM Charges
CAM charges have no annual cap. Property taxes, insurance, and management fees can rise without limit. On a NNN lease this creates significant open-ended financial exposure. Market standard: 3–5% annual cap on controllable expenses.
"Tenant shall pay its pro rata share of all Operating Expenses for the Property, including but not limited to real property taxes, insurance premiums, and common area maintenance costs, without limitation or cap on annual increases."
HIGH RISK
Full-Term Personal Guarantee, No Burn-Off
Personal guarantee covers the full 5-year term with no burn-off. If the business fails in Year 2, James Mitchell is personally liable for remaining rent through 2029. Potential personal exposure: $200,000+. Market standard: 12–24 month burn-off after consistent timely payment.
"Guarantor unconditionally guarantees the full and prompt performance of all obligations of Tenant under this Lease throughout the full term hereof, without limitation, reduction, or release upon partial performance."
HIGH RISK
No Early Termination Right
Tenant has no right to exit the lease early under any circumstances. Business failure, revenue decline, or any other event does not allow exit without full liability for remaining rent. A 5-year NNN commitment with no exit is substantial risk.
MEDIUM RISK
No Exclusivity Protection
Landlord expressly reserves the right to lease to competing coffee or café concepts in the same shopping center. A direct competitor next door could significantly impact revenue.
MEDIUM RISK
Assignment at Landlord's Sole Discretion
Assignment can be refused in the landlord's sole discretion. This significantly limits exit options if you sell the business — the buyer may not be able to take over the lease.
LOW RISK
Renewal Rent at Fair Market Value — Landlord Determined
Renewal rent is set by the landlord's determination of fair market value. While tenant can dispute within 30 days, the burden is on the tenant to challenge. A defined formula would be more protective.
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Critical Dates

March 1, 2024
Lease commencement — rent begins (subject to build-out completion)
May 31, 2028
Renewal option notice deadline — must exercise 9 months before expiration or option is permanently lost
February 28, 2029
Lease expiration — holdover at 150% ($4,800/month) begins if not renewed or vacated
March 1, 2025
First annual CAM reconciliation — actual vs. estimated charges trued up
January 15 (annual)
CAM estimate statements delivered by landlord for following year
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Top Negotiation Priorities

1
Negotiate CAM cap
Without a CAM cap, your operating costs have no ceiling. Property tax reassessments, insurance increases, and management fees can compound annually with no limit.
Suggested ask: Request a 5% annual cap on all controllable CAM expenses (exclude taxes and insurance from the cap). This is market standard.
2
Personal guarantee burn-off
A full-term guarantee means your personal assets are exposed for the entire 5 years. If the business closes in Year 2, you owe 3 more years of rent personally — potentially $150,000+.
Suggested ask: Propose: guarantee reduces to 12 months of obligations after 24 consecutive months of timely payment. Offer to increase security deposit from 3 months to 6 months in exchange.
3
Early termination right
A 5-year NNN commitment with no exit is extremely risky. Market conditions, health events, or business underperformance could make the space untenable with no legal exit.
Suggested ask: Request a one-time early termination right exercisable after Month 30, with 180 days notice and a termination fee equal to 6 months of base rent.

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