Questions to Ask When Negotiating A Commercial Lease Agreement

If you are searching for commercial space for your business, there are several categories of questions you should ask before you sign a lease agreement. These include:

Is the amount of square footage and configuration of space appropriate for your business? Do you have the right to modify or change the space? Will the landlord do initial improvements or modifications before you take occupancy?

Are there restrictions on how the space can be used? Do you have rights to common areas, or are those areas restricted to use by other tenants or by the landlord? 

What is the term or length of the lease? Do you have a right to renew, and if so, is it automatic or optional? Is there a requirement to notify the landlord in advance that you do not intend to renew or that you want to extend the lease? If so, how far in advance must notice be given? What penalties will be if you do not timely give notice to the landlord that you do not wish to renew? Similarly, how much notice is the landlord required to give if space is leased to another party or if the landlord intends not to renew your lease? 

Lease terms for a commercial lease are often significantly longer than typical residential lease agreements and may be difficult to break. They may include high penalties for early termination or breach of lease provisions.

What is the base rent and how is it calculated? Is there an acceleration clause which would give the landlord the right to demand the entire unpaid balance at once? If so, what triggers the acceleration?

Does the rent amount include utilities, structural maintenance, cleaning services, garbage removal, property taxes, HVAC, plumbing or other system maintenance, and/or insurance? Is the lease a “gross lease” that would include expenses, or a “net lease” which covers only a base rent and you pay expenses directly? Or is it some combination of these? If you are paying a share of expenses, how is your share calculated?

Is there a security deposit? How much? How will it be collected? What are the conditions for its return?

Whose name is on the lease and who is responsible for the obligations under the lease? Is the lease in your name or the business’ corporate name? If the business is a signatory to the lease, is there a personal guaranty required?
What are landlord’s obligations under the lease? Will you be required to pay some, or all of the costs associated with meeting the landlord’s obligations?

Who is responsible for maintenance of common areas, including parking areas, sidewalks and the exterior of the building? Who is responsible for garbage and snow removal, landscaping or other exterior maintenance?

Are you permitted to assign the lease or to sublet portions of the leased premises to third parties? Under what conditions? Will assignees or sublessees be subject to the terms of your lease agreement or will the landlord require negotiation of new terms with these third parties (which may reduce the value of the assignment or sub-lease)?

Does the lease include an arbitration or mediation clause, or a clause that restricts where lawsuits over the lease agreement can be brought?

Is the building compliant with the Americans with Disabilities Act or other laws regarding accessibility? Who is responsible for ensuring compliance, paying costs associated with making the building compliant?

Negotiation of commercial leases is typical and expected. Many commercial landlords use a standard form lease that was developed to their own specifications. As a result, specifically negotiated terms may not appear on the standard form lease, and the agreement should be reviewed carefully before it is signed.

You should choose a lawyer who is a highly skilled negotiator and is familiar with commercial lease in your geographic area to review and negotiate your lease agreement. Use our site to connect with a commercial real estate lawyer near you.