Most first-time tenants sign the wrong lease, not because they were reckless, but because nobody told them what to ask.
A commercial lease is typically a five to ten year financial commitment. It can outlast partnerships, business pivots, and in some cases, the business itself. The clauses you skim past on signing day are the ones that show up later as five-figure problems.
Here are the seven questions to ask before you sign, and the clauses that quietly cost the most.
1. What is the total occupancy cost, not just the base rent?
Base rent is the headline. Your real number is base rent plus NNN, utilities, trash, insurance, and any percentage rent. Run that total against your projected revenue before you fall in love with a space.
2. What does the personal guarantee actually look like?
Most first leases include a personal guarantee. That means if your business cannot pay, you personally can. The negotiation is not always about removing it. It is often about limiting it. A burn-off guarantee that reduces or terminates after a set number of months of good payment history is far better than a full-term guarantee. Ask for it.
3. What are the rent escalations and how are they calculated?
Some leases use a fixed annual bump, often 3 percent. Others use CPI, which can move unpredictably. Some have step increases that look small in year one and brutal by year seven. Model the rent for the full term, not just year one.
4. What is the assignment and sublease language?
If you ever want to sell your business, bring on a partner, or exit early, the assignment clause determines whether that is possible. A restrictive assignment clause can trap you. A flexible one can save the business.
5. What happens at renewal?
Does the lease give you an option to renew at a defined rate or at fair market value? “Fair market value” sounds reasonable until you realize the landlord defines it. Build renewal options with clear pricing mechanics or known caps.
6. Who is responsible for what in the build-out?
Tenant improvement dollars, also called TI, are negotiable. So is the timeline. So is who pays for permits, HVAC, grease traps, vent hoods, and ADA compliance. First-time tenants routinely sign leases where the landlord delivers a shell and the tenant carries six figures of unexpected build-out cost. Get the work letter in writing before the lease, not after.
7. What is the exclusivity and co-tenancy language?
If you are a coffee shop, can the landlord lease the space next door to another coffee shop? If the anchor tenant leaves, do you have any protection or right to renegotiate? These clauses matter more than founders realize, especially in centers where the tenant mix is the draw.
The clauses that quietly cost the most
Beyond the seven questions, watch these specific clauses. They are the ones I see drain operators over a long lease term:
- Holdover rent. If you stay past the lease term without renewing, holdover rent is often 150 to 200 percent of base. Know the trigger.
- Relocation clauses. Some landlords reserve the right to move you within the center. For a brand built on a specific location, this is devastating.
- Continuous operations clauses. These require you to keep operating during set hours. If your business model evolves and you want to shift hours, this clause can block you or trigger default.
- Recapture rights. Tied to assignment. The landlord can sometimes take back your space instead of approving a transfer.
- Default and cure periods. How many days do you have to fix a problem before the landlord can terminate? Short cure periods are a real risk.
The bottom line
You do not need to be a lawyer to sign a smart commercial lease. You need a broker who represents your side of the table, an attorney to review the document, and a willingness to slow down at the LOI stage, because that is where leverage actually lives. By the time the lease is drafted, most of the meaningful terms have already been set in the LOI.
Sign with intention. Negotiate with information. And do not let “this is just how leases are written” be the reason you accept terms that cost you for a decade.