Your First Commercial Lease: What to Know Before You Sign

Commercial leases have none of the consumer protections residential renters take for granted — everything is negotiable, and everything not negotiated defaults in the landlord's favor. Theo, our commercial expert, translates the jargon before you commit to five years of it.

Know what kind of lease you're reading

• Gross (full-service): one rent number; the landlord pays taxes, insurance, and maintenance.
• Triple-net (NNN): base rent plus your share of property taxes, insurance, and common-area maintenance — the true cost is base rent plus NNN charges.
• Modified gross: somewhere in between; the details are whatever the lease says they are.

The numbers beyond base rent

• CAM charges: your pro-rata share of common-area costs — ask for history and negotiate a cap on annual increases.
• Escalations: annual rent bumps, commonly 2–3% fixed or CPI-linked.
• TI allowance: landlord money for building out your space — negotiate hard here, especially on longer terms.
• Free rent: months of abatement are common on new leases and cheaper for landlords to give than lower base rent.

Clauses that deserve real attention

1. 1Personal guarantee: try to cap it (a 'good guy' clause or burn-off after on-time years) rather than guaranteeing the full term.
2. 2Assignment and subletting: your exit ramp if the business changes — don't accept a flat prohibition.
3. 3Exclusive use: for retail, prevent the landlord from leasing to a direct competitor in the same center.
4. 4Repair responsibilities: in NNN leases you may own the HVAC — know its age before you sign.
5. 5Options to renew: locked renewal terms protect you from being priced out after building a location's goodwill.

Residential leases protect tenants by law. Commercial leases protect whoever negotiated better.