Commercial Lease Negotiation Checklist

Most leases include annual rent escalations tied to CPI or a fixed percentage. Without a cap, a high-inflation year can spike your rent far beyond what you budgeted. Negotiate a fixed rate of 3% or less — or, if CPI-based, a ceiling of 3–4% regardless of actual inflation.

In NNN and modified gross leases, CAM charges are passed through to tenants. Without a cap, the landlord can increase controllable expenses (management fees, maintenance, landscaping) at any rate. Negotiate an annual cap of 5% on controllable expenses, excluding taxes and insurance.

A full-term personal guarantee means your personal assets are exposed for the entire lease term — often 5–10 years of rent. Negotiate a "good guy" clause (guarantee burns off if you vacate and give proper notice), a dollar cap tied to 6–12 months of rent, or a burn-off schedule tied to on-time payment history.

Security deposits in commercial leases are often large — $20,000–$100,000+. You can negotiate an annual step-down: if you pay rent on time and don't default, the deposit reduces automatically each year. Most landlords will agree to a 20% annual reduction after year one. That returns money to your business while you're still in occupancy.

Renewal options are useless if the rent-setting method is open-ended. "Fair market value" determined by the landlord at the time of renewal gives you no certainty. Negotiate a fixed renewal rate, a capped increase over last year's rent, or an appraisal process with mutual input and a specific timeline for dispute resolution.

Business circumstances change. Without an early termination clause, you're liable for the full remaining rent if you need to exit. Negotiate the right to terminate after a defined midpoint (e.g., after year 3 of a 5-year lease) with 6 months' written notice and a defined termination fee — typically 3–6 months' rent, not the full remaining balance.

Most commercial leases set the holdover rate at 150–200% of last month's rent. This penalizes you severely if move-out runs even one day late. Negotiate to 110–125% — still compensates the landlord but doesn't destroy you if your contractor is two days slow on your new space.

If your lease prohibits assignment or subletting without landlord consent and no standard for that consent is defined, you have no leverage if you need to exit. Negotiate that landlord consent is "not to be unreasonably withheld, conditioned, or delayed" (NWCD) and that silence for more than 30 days constitutes approval.

If you're a retailer or restaurant, the landlord can lease to a direct competitor down the hall unless exclusivity is written into your lease. The category must be defined broadly enough to cover all variations of your business. Get a remedy clause — typically rent abatement or termination right — if the exclusivity is violated.

Many commercial leases include a landlord relocation right — the ability to move you to another space within the property. The risk: you build out, install signage, train customers to find you — then the landlord can move you. If you can't eliminate it, negotiate: 90+ days' notice minimum, all relocation costs paid by landlord, comparable or better space, and a termination right if you don't accept.