Editorial · June 16, 2025
Commercial Lease Negotiation: Terms Tenants Should Check
Commercial lease negotiation is where a small business can save or lose real money, and the rent number is only part of it. Before you sign, check seven things: the rent and who pays the extra costs, the length of the lease, the build-out, the permitted use, whether you can sublease, who is on the hook personally, and how you can leave. This checklist walks through each one in plain terms.
Why a commercial lease is not a residential lease
Most owners know what renting an apartment is like. You pay the listed price or you find another place. A commercial lease works differently. A landlord who wants to fill a space is often willing to make concessions, so many terms can be discussed.
That is good news, but only if you know what to ask for. Many first-time tenants focus on the monthly rent and skip the clauses that cost more later. FindLaw, a legal information site, notes that most small-business owners have little experience with this process and suggests having a business attorney help during the talks.
Where you rent also matters before the talks start. The U.S. Small Business Administration says that rental rates, property values, business insurance rates and utilities can all vary a lot by location. It also says that if you rent a physical property, you should make sure it fits local zoning rules. Zoning is usually set at the local level, so ask your city planning office.
Rent, triple net charges and rent increases
Base rent is the cost per square foot times the square footage of the space. Check how the landlord measured the space. FindLaw points out that a landlord may count a hallway or stairwell in the rentable square footage, and an attorney can help spot that.
Then ask what else you will pay. FindLaw describes four common setups:
- Gross lease: you pay base rent only, and the landlord covers the other costs.
- Net lease: base rent plus one extra category, such as tax, maintenance or insurance.
- Double net lease: base rent plus two of those categories.
- Triple net lease: base rent plus all three. Triple net leases are most common in longer leases.
With a triple net lease, the rent should be low enough to make up for the extra costs you take on. Ask for the past few years of tax, insurance and maintenance bills so you can see what the add-ons really are. Common area maintenance, or CAM, covers shared spaces such as lobbies, exterior landscaping and bathrooms.
Also ask how rent will rise. FindLaw says some landlords tie increases to the Consumer Price Index, others follow the local market, and others use a fixed percentage. You may prefer a set dollar amount or an annual percentage. Whichever you choose, get it in writing.
Lease length and renewal options
A short lease keeps you flexible. A new business may want that in case things do not work out, or in case it grows faster than planned. A long lease gives the landlord steady income, and FindLaw says landlords may make more concessions to tenants who agree to one.
If you like the spot but are unsure about a long commitment, ask about a renewal option. A short lease with an option to extend is a fair counteroffer to a landlord who wants a long-term tenant. When you read the option, look at three things: how much notice you must give, how long the extension runs, and how the rent will be set for the extra years.
Build-outs, improvements and permitted use
Most spaces need some work before you can open. These changes are called build-outs. FindLaw says the talks should settle who pays for materials and labor, and whether you must restore the space to its original state when you leave.
Two details deserve a close look. First, make sure the cost of your own improvements is not folded into maintenance or repair charges that you then pay again. Second, if your work raises the value of the property, FindLaw says tenants should get some benefit in the rent.
The permitted use clause says what your business may do in the space. Zoning rules may set some of these terms, so not every word can change. Where there is room, FindLaw advises asking for the broadest wording that fits your business, in case you expand or change what you offer.
Personal guarantees
Many landlords ask the owner to sign a personal guarantee, especially when a business is new. FindLaw explains that this makes you personally liable for rent if the business cannot pay. If the business has a hard stretch or fails, the landlord can sue you for the unpaid rent.
The best outcome is no guarantee at all. FindLaw says steady profits or a record of paying rent on time elsewhere might help you avoid one. If the landlord insists, it lists two options to raise:
- Time release: the guarantee ends after a set time and proven payment, for example two years into a five-year lease.
- Good guy clause: you stay liable only until you have lawfully left the space, as long as you pay your rent until then.
Getting out of a guarantee after you sign is hard, so settle this point first. Talk with a lawyer before you agree.
Subleases, termination and move-out
Ask whether you can sublet or assign the lease. FindLaw says this can protect you on a long lease if you must move before it ends, because you can sublet to another tenant instead of breaking the lease or paying double rent.
Every lease should also have a termination clause and clear move-out terms, no matter how long it runs. Ask how the security deposit is handled. FindLaw notes that in some states the tenant receives the interest or a month of free rent as an offset, and rules differ by state, so check yours.
Finally, list your fixtures. A restaurant that installs thousands of dollars of kitchen equipment needs the lease to say whether that equipment belongs to the business or stays with the property when it leaves.
This article is general information and not legal advice. Lease law differs by state, so use a lawyer in yours.