A commercial lease is often the largest and longest financial commitment a small business makes. The terms go well beyond the base rent, and several clauses can materially change what you actually pay. Here are the ones to understand.
Rent escalation
Most commercial leases increase rent over the term, either by a fixed percentage each year or tied to an index. Calculate the rent in the final year, not just the first, to see the real commitment.
CAM and pass-through charges
Common area maintenance, taxes, and insurance are frequently passed through to tenants on top of base rent. These can be significant and sometimes uncapped. Look for a cap on annual CAM increases.
Personal guarantees
Many landlords require the business owner to personally guarantee the lease, putting personal assets at risk if the business cannot pay. Look for a “good guy” clause that limits the guarantee if you leave the space in good standing.
Assignment, subletting, and renewal
Check whether you can assign or sublet the space if your needs change, and what renewal options exist. Watch for auto-renewal and holdover penalties.
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Commercial leases are long and the costly terms are spread throughout. AI contract review helps you find them quickly. See our small business contract review guide.
ContractsIQ provides software-based contract analysis and is not a law firm or a substitute for legal advice. For decisions with significant legal or financial consequences, consult a qualified attorney.