When negotiating a commercial lease, most tenants focus on the obvious — rent, square footage, lease term. But beneath these headline numbers lies a dense legal document filled with provisions that can dramatically impact a business’s flexibility, liability, and long-term success. For businesses eager to secure space and open their doors, the commercial lease may feel like a mere formality. In reality, it’s one of the most critical contracts a business will enter into — and one of the riskiest to sign without close scrutiny.
This article explores the often-overlooked clauses and hidden risks that commercial tenants should be aware of before signing on the dotted line. While the goal isn’t to scare businesses out of leasing space, it is to equip them with the knowledge they need to protect their interests and negotiate effectively.
Lease Type: Don’t Assume It’s All-Inclusive
Commercial leases come in several varieties: gross leases, modified gross, triple net (NNN), and absolute net leases. Each type allocates responsibility for expenses differently.
In a triple net lease, the tenant pays not only rent but also taxes, insurance, and maintenance — costs that can vary significantly year over year. An absolute net lease may push even more responsibility (like structural repairs) onto the tenant. In contrast, a gross lease may include these expenses in the rent — but can come with higher base rent or less flexibility.
A triple net lease (triple-net or NNN) is a lease agreement on a property where the tenant promises to pay all expenses, including real estate taxes, building insurance, and maintenance. These expenses are in addition to the cost of rent and utilities. NNNs are one type of commercial property net lease. A single net lease requires tenants to rent plus one of the tenant’s property expenses, typically property taxes. A double net lease typically requires tenants to pay property taxes and insurance in addition to rent.
Always ask for a clear, itemized breakdown of expenses and understand how they can escalate over time. Negotiate caps on certain costs where possible.
Operating Expenses and CAM Charges: Beware the Open-Ended Obligations
Common Area Maintenance (CAM) charges and other operating expenses are often glossed over in lease negotiations but can be significant — and unpredictable.
Tenants should review:
What qualifies as a CAM expense (Is the landlord charging for capital improvements or management fees?),
How expenses are allocated among tenants, and
Whether there are caps, audit rights, or exclusions.
Landlords may include vague language like “including but not limited to,” which opens the door to future charges the tenant didn’t anticipate.
Push for language that limits CAM charges to actual, reasonable, and necessary costs. Secure audit rights and annual CAM reconciliations to verify charges.
Repair and Maintenance Clauses: Know What You’re on the Hook For
A deceptively simple clause like “tenant shall maintain the premises in good condition” can balloon into a costly obligation — especially in older buildings or long-term leases.
Look for:
Who is responsible for HVAC repairs or replacement,
Whether you’re liable for structural repairs or building systems outside your suite,
The condition of the premises at the lease’s start (often, there is no warranty or representation about this).
Leadership angle: Businesses should conduct a pre-lease property inspection, much like a homebuyer does. Consider negotiating warranties or carveouts for major systems.
Tenant Improvement Allowances: Free Money Isn’t Always Free
Tenant improvement (TI) allowances are often seen as a bonus — but they come with strings. TI funds may only be disbursed after the tenant spends money up front. Some landlords impose strict guidelines on what qualifies, how contractors are selected, and when reimbursement occurs.
What’s more, the tenant may be obligated to remove improvements at lease end, especially if those improvements are considered “specialized.”
Recommendation: Ensure the lease includes:
A clear TI disbursement timeline,
Definitions of what qualifies,
Flexibility in design/contractor selection, and
Removal obligations — or better yet, a waiver of them.
Assignment and Subletting: Your Future Flexibility Is at Stake
Startups, growing companies, and even established businesses need the flexibility to pivot. Yet many commercial leases tightly restrict assignment or subletting.
Even when permitted, tenants often remain secondarily liable if the new occupant defaults. Some leases even include recapture rights, allowing landlords to terminate the lease if a tenant tries to assign it.
In today’s economy, flexibility is essential. Negotiate the right to assign or sublease with reasonable consent standards and request release from liability upon assignment to a creditworthy tenant.
Personal Guarantees: When Business Risk Becomes Personal Risk
Landlords may request personal guarantees, especially from small businesses or startups without a long credit history. While understandable from the landlord’s perspective, these guarantees can put a business owner’s personal assets at risk — home, savings, even retirement funds.
There are ways to mitigate the risk:
Limited guarantees (e.g., only for the first year),
Guarantees that terminate if the tenant vacates and pays current obligations,
Guarantees that expire after a certain period or upon meeting financial benchmarks.
Thought leader approach: Business owners should treat personal guarantees as negotiable — not inevitable.
Use Clauses and Exclusivity: Define Your Rights, Protect Your Business
Most leases limit what a tenant can do on the premises, often with a narrowly defined “use clause.” If the business pivots or grows into new services, that clause can become a constraint.
Even more critical are exclusivity clauses — provisions that prevent landlords from leasing nearby space to direct competitors. Without such protection, your foot traffic and brand identity could be compromised overnight.
Push for a use clause broad enough to cover foreseeable changes. If competition is a concern, negotiate for exclusivity or at least a right to be notified of new tenants.
Default and Remedies: The Silent Landmines
Default provisions often favor landlords. A single missed payment or minor lease violation can trigger something in the lease such as accelerated rent (i.e., the entire lease balance becomes due).
Tip: Negotiate for cure periods (time to fix the default), limit accelerated rent, and preserve key legal protections.
Renewal and Rent Escalation: Don’t Leave the Future to Chance
Options to renew seem straightforward — but they’re often written in vague or unenforceable ways. Who sets the “market rate” for a renewal term? What if there’s no agreement?
Rent escalation clauses can also be problematic, especially if they’re tied to undefined metrics or broad CPI increases.
Leadership insight: Build renewal terms with clearly defined rent increases or appraisal processes. Avoid open-ended escalation language.
Exit Strategies: Planning for the End — Before You Begin
No one wants to think about the end of a lease while signing it. But businesses close, downsize, and relocate. Knowing your exit strategy is essential.
Look for:
Early termination rights (even if they come with a penalty),
Options to assign or sublease, and
End-of-lease obligations like restoration or fixture removal.
Forward-thinking move: Treat exit strategy as a standard part of your lease checklist. Build in flexibility early so you’re not boxed in later.
Final Thoughts: Don’t Just Sign — Strategize
In commercial real estate, the lease is not just a legal document; it’s a blueprint for your business’s physical footprint, financial obligations, and operational flexibility. And yet, it’s easy to rush the process, especially when the perfect space is available or the landlord is pressuring a quick signature.
Smart business leaders treat the lease as a strategic asset, not a static form. That means investing the time, advice, and negotiation power to get it right. Engage with experienced legal counsel. Review the fine print. Ask hard questions. Negotiate what matters most to your business — now and in the future. Because when it comes to commercial leasing, what you don’t know can cost you far more than the rent.