The short answer
Before you sign a commercial lease, check ten things: the term and your renewal option, the personal guaranty, what you pay beyond base rent (taxes, insurance, maintenance), rent increases, the security deposit, the permitted use, repairs, assignment and subletting, and what happens if you default. Commercial landlords are not required to renew your lease, so the renewal option you negotiate now is the one you will have.
We make Extra, an AI agent platform, so this article is written by an interested party. Facts about other tools and about the law come from the sources listed at the bottom, as of the date shown.
Why read a commercial lease so carefully?
A commercial lease is the contract that lets your business occupy a store, office, shop or warehouse, and unlike a residential lease, it comes with very few legal protections for the tenant. Most terms are whatever you and the landlord negotiate. That means the lease the landlord’s attorney drafts is written for the landlord, and every clause you do not question is a clause you accept.
It is also a long commitment, usually signed when you know the least: right before opening. NYC Small Business Services’ Commercial Lease Guide notes that the most common commercial lease term is 10 years with an option to renew for another 5. Here are the ten things to check, roughly in the order they cost the most when missed.
Which 10 things should you check before signing?
| Item | Question to ask | Red flag |
|---|---|---|
| 1. Term | How long am I committed? | A long term with no early exit |
| 2. Renewal option | Can I stay, and at what rent? | No option, or renewal rent “as set by landlord” |
| 3. Personal guaranty | Am I personally on the hook? | A full guaranty with no cap or end date |
| 4. Total occupancy cost | What do I pay beyond base rent? | Open-ended pass-through of taxes, insurance, maintenance |
| 5. Rent increases | Fixed steps or market rate? | No cap on increases |
| 6. Security deposit | How much, and when is it returned? | No timeline for the refund |
| 7. Permitted use | What can I sell or do here? | A use clause narrower than your plans |
| 8. Repairs | Who fixes the roof, HVAC, plumbing? | All repairs and replacements on you |
| 9. Assignment and sublet | Can I sell the business with the lease? | Landlord consent at its sole discretion |
| 10. Default | What happens if I fall behind? | Accelerated rent for the whole term |
What does the personal guaranty really mean?
A personal guaranty makes you, the owner, personally responsible for the lease, even though the business is the tenant. If the business closes, the landlord can come after your personal assets for the rent. The NYC guide distinguishes a “full guaranty,” covering all of the tenant’s obligations, from a “good guy guaranty,” where you are personally responsible only while the business occupies the space; once you vacate properly, you are no longer personally liable for the rent that follows.
A new business with no track record will almost always be asked for a guaranty. You can still negotiate its shape: a good guy guaranty, a cap on the amount, or a guaranty that ends after a few years of on-time rent. The NYC guide also warns that a lease is not a true good guy guaranty if it makes you pay the entire balance of rent (“accelerated rent”) or repay the landlord’s tenant improvement allowance, free rent or broker commission.
What will you actually pay each month?
Base rent is only part of the cost. In a net lease, you pay base rent and a share of the building’s operating expenses; in a triple net (NNN) lease, that share covers property taxes, insurance and maintenance, often called CAM (common area maintenance). A space with lower base rent can cost more in total than a gross lease where the landlord carries those costs.
A worked example for a dental office looking at 1,500 square feet: base rent of $30 per square foot per year is $3,750 a month. If NNN charges run $9 per square foot, that adds $1,125 a month, for a real cost of $4,875. Ask for the last two years of actual operating expenses before you sign, and for a cap on how much controllable costs can rise each year.
Commercial landlords are not required to renew your lease, and once it ends they can ask any rent, the NYC guide notes. If you plan to invest in the space, negotiate the renewal option, and how its rent is set, now.
Which other clauses deserve attention?
- Permitted use: “coffee shop” may block you from selling sandwiches; “cafe, bakery, prepared food and retail” leaves room to grow.
- Zoning: the SBA reminds owners that a property must conform to local zoning requirements, controlled at the city level. Check with the city planning office before signing, not after.
- Repairs and replacements: a clause making you replace the HVAC system if it fails, even late in the term, can cost more than a year of rent.
- Security deposit: the NYC guide says landlords usually refund it 30 to 45 days after you vacate, if you owe nothing; write the timeline into the lease, and ask to reduce the deposit after a few years of on-time payments.
- Assignment: if you ever sell the business, the buyer needs the lease. Consent “not to be unreasonably withheld” is far better than consent at the landlord’s sole discretion.
- Letter of intent: do not pay the landlord or start building out the space before the lease itself is signed.
Can AI review your commercial lease?
AI can do a useful first read of a commercial lease: flag the clauses on the list above, point out what is missing, compare two drafts from the landlord, and prepare questions for your attorney. It does not replace a commercial real estate attorney for a ten-year commitment, and it can miss a local rule or a recent change.
At Extra (hello-extra.com), the AI agent platform for small businesses, this is the role of Clara, the legal agent: she reviews the lease, annotates risky clauses, compares two versions and exports the annotated document. She helps you walk into your attorney’s office with the right questions instead of paying for hours on the simple parts. Our post on whether AI can review a contract covers what it catches and what it misses.
Frequently asked questions
Can you negotiate a commercial lease?
Yes, and more than most first-time tenants think. Base rent, free rent during build-out, the tenant improvement allowance, the use clause, caps on expenses, the guaranty and renewal terms are all negotiable. Negotiate before signing: afterward, every change needs the landlord’s agreement.
What is a letter of intent?
A short document listing the main terms (rent, length, deposit) that you and the landlord agree on before the full lease is drafted. It is generally not a binding contract, per the NYC guide, and many important terms only appear in the lease itself, so read the full lease even if the letter of intent looked fine.
Should I use a broker?
A tenant broker can help you compare spaces and rents, and is often paid by the landlord. Ask how they are paid, and still have an attorney review the lease: the broker’s job is to close the deal, not to protect you from its clauses.
Can AI tell me if the rent is fair?
Not reliably. Fair rent depends on comparable spaces nearby, which a broker or local listings show better. Use AI to understand the lease and spot costly clauses, and check rent against at least three similar spaces in the same area.
Key takeaways
- The most common term is 10 years with a 5-year option; landlords do not have to renew.
- Negotiate the guaranty: good guy, capped or time-limited.
- Compare total occupancy cost, not base rent: NNN charges added 30% in our example.
- Read permitted use, repairs and assignment closely; that is where costs hide.
- Check zoning, and have an attorney review before you sign.
Read next: how to automate small business admin and Extra pricing.
