Commercial Lease Checklist

Before you hang out your new shingle, read the fine print on the lease.

From: Nolo.com Inc. | October 2000

It's crucial to understand from the get-go that, practically and legally speaking, there are oceans of differences between commercial leases and residential leases. Commercial leases are not subject to most consumer protection laws that govern residential leases - for example, there are no caps on deposits or rules protecting a tenant's privacy. Keep in mind that besides the amount of the rent, other less conspicuous items spelled out in the lease may be just as crucial to your business's success. For instance, if you expect your shoe repair business to depend largely on walk-in customers, be sure that your lease establishes your right to put up a sign that's visible from the street. And if you are counting on being the only sandwich shop inside a new commercial complex, make sure your lease prevents the landlord from leasing to a competitor.

The following checklist includes many items that are often addressed in commercial leases. Pay special attention to a few of the terms, including:

rent, including allowable increases and method of computation
security deposit and conditions for return
length of lease - also called the lease term
whether the rent you pay covers utilities, taxes and maintenance - called a gross lease; or whether you will be charged for these items separately - called a net or, if the tenant must cover three additional costs, a triple net lease
whether there's an option to renew the lease
if and how the lease may be terminated, including notice requirements
what space is being rented, including common areas such as hallways, rest rooms and elevators
specifications for signs, including where they may be placed
whether there will be improvements, modifications or fixtures - often called buildouts - added to the space, who will pay for them and who will own them after the lease ends
who will maintain the premises
whether the lease may be assigned or sublet to another party,
whether disputes must be mediated or arbitrated as an alternative to court