What Landlords Should Include in a Commercial Lease
A commercial lease shapes a long-term business relationship.
It controls rent, repairs, insurance, property use, improvements, risk, and exit rights.
A short lease often leaves important questions unanswered. A long lease still fails when it uses vague terms or copied language.
Your lease should match the property, the tenant, and the deal.
Identify the Parties Correctly
Start with the exact legal names of the landlord and tenant.
If either party uses an LLC or corporation, confirm the name through state records.
Do not use only a trade name.
For example, a store sign might show one name while the operating company uses another legal name.
The lease should also list:
• Notice addresses
• Contact information
• Entity type
• State of formation
• Authorized signer
Verify that the signer holds authority to bind the company.
Describe the Premises
The lease should identify the rented space with precision.
Include:
• Street address
• Suite number
• Approximate square footage
• Storage areas
• Parking rights
• Common areas
• Loading areas
• Outdoor areas
• Shared facilities
Attach a floor plan or site plan when useful.
Disputes often arise over hallways, patios, signs, storage rooms, and parking spaces.
Define those areas before occupancy.
State the Permitted Use
The permitted-use clause explains what the tenant does in the space.
Avoid language that remains too broad or too narrow.
A broad clause might create zoning, insurance, or tenant-mix problems.
A narrow clause might stop the tenant from adding related services.
The clause should address:
• Primary business activity
• Related products or services
• Prohibited uses
• Compliance with zoning
• Compliance with licensing rules
• Hazardous materials
• Noise and odor limits
• Hours of operation
The tenant should confirm that the planned use meets local rules.
The landlord should avoid promising approval unless the landlord controls it.
Define the Lease Term
State the start and end dates.
Also explain what triggers rent.
Dates might depend on:
• Lease signing
• Delivery of possession
• Completion of landlord work
• Completion of tenant work
• Certificate of occupancy
• Business opening
Define the rent commencement date separately when it differs from the lease start date.
Address delays caused by construction, permits, utilities, or prior tenants.
State whether the tenant receives termination rights after a long delay.
Explain Base Rent
List the rent amount for each period.
Do not rely on informal discussions about future increases.
The lease should state:
• Monthly rent
• Payment date
• Payment method
• Escalation schedule
• Late fee
• Interest on overdue amounts
• Returned payment charges
• Grace period
Rent increases might use:
• Fixed annual increases
• Percentage increases
• Inflation-based adjustments
• Market-rate adjustments
Define the method with enough detail to avoid future disputes.
Address Additional Rent
Commercial tenants often pay more than base rent.
Additional rent might include:
• Property taxes
• Building insurance
• Common area maintenance
• Utilities
• Management fees
• Repairs
• Security
• Landscaping
• Waste service
The lease should explain how the landlord calculates each charge.
If tenants share costs, define the tenant’s proportionate share.
That share often relies on rented square footage compared with total rentable space.
Clarify whether vacant space changes the allocation.
Define Common Area Maintenance
Common area maintenance charges often create conflict.
List included expenses.
Also list excluded expenses.
Possible inclusions:
• Parking lot cleaning
• Hallway lighting
• Landscaping
• Snow removal
• Security
• Common restroom care
• Property management
Possible exclusions:
• Landlord income taxes
• Leasing commissions
• Legal fees for unrelated disputes
• Costs caused by another tenant
• Major structural replacement
• Debt payments
• Ownership transfer costs
Some leases place annual limits on controllable expenses.
Define which expenses count as controllable.
Assign Repair Duties
State who handles each part of the property.
Address:
• Roof
• Foundation
• Structural walls
• Exterior walls
• Windows
• Doors
• Heating and cooling
• Plumbing
• Electrical systems
• Fire systems
• Interior finishes
• Parking areas
• Signs
Do not use only the phrase “tenant handles all repairs.”
That language often creates disputes over capital replacement and hidden defects.
Define maintenance, repair, and replacement separately.
Set Inspection and Notice Duties
A small issue often grows when no one reports it.
Require the tenant to notify the landlord about:
• Leaks
• Electrical problems
• Mold
• Structural damage
• Fire system problems
• Security failures
• Hazardous conditions
Give the landlord reasonable inspection rights.
State how much notice the landlord gives, except during emergencies.
Explain when the landlord enters for repairs, inspections, tours, or lender visits.
Address Improvements
Commercial tenants often modify the space.
The lease should state:
• Which work needs approval
• Plan submission rules
• Contractor requirements
• Permit duties
• Insurance requirements
• Construction hours
• Lien protection
• Ownership of improvements
• Removal duties at lease end
A lien arises when an unpaid contractor or supplier claims an interest in the property.
Require lien waivers and proof of payment where appropriate.
Clarify whether the tenant must remove wiring, walls, signs, equipment, or fixtures when leaving.
Define Delivery Condition
The lease should explain the condition of the space at delivery.
Common approaches include:
• As-is delivery
• Turnkey delivery
• Landlord work letter
• Tenant improvement allowance
An improvement allowance provides a set amount toward approved construction.
The lease should explain:
• Allowance amount
• Eligible costs
• Payment timing
• Documentation
• Deadline
• Unused funds
• Cost overruns
Attach detailed plans or specifications for promised landlord work.
Address Permits
The tenant often needs permits and licenses for occupancy.
The lease should assign responsibility for:
• Building permits
• Sign permits
• Business licenses
• Health approvals
• Fire inspections
• Occupancy certificates
• Accessibility work
The parties should also address what happens if the tenant does not receive required approvals.
A permit contingency might give the tenant a limited termination right.
Set Sign Rules
Signs matter to commercial tenants.
The lease should cover:
• Building signs
• Monument signs
• Window signs
• Temporary signs
• Sign size
• Sign location
• Design standards
• Permit responsibility
• Removal at lease end
Confirm whether other tenants hold exclusive sign rights.
Do not promise sign placement that zoning or a property association prohibits.
Address Parking
Parking terms should match the property’s actual setup.
State:
• Number of spaces
• Reserved or shared use
• Customer parking
• Employee parking
• Accessible spaces
• Overnight parking
• Loading zones
• Towing rules
• Maintenance duties
A retail tenant might need customer turnover.
An office tenant might need assigned spaces.
A restaurant might need delivery and pickup areas.
Match the clause to the use.
Require Insurance
Both parties need suitable insurance.
Tenant coverage often includes:
• Commercial general liability
• Property coverage
• Workers’ compensation
• Business interruption
• Auto coverage
• Liquor liability for alcohol service
The lease should list minimum limits and required endorsements.
It should also explain who receives certificates and renewal notices.
Review insurance terms with an insurance professional before signing.
Address Indemnity
An indemnity clause assigns responsibility for certain claims and losses.
Use clear language.
The lease should reflect:
• Control over the risk
• Negligence
• Property condition
• Tenant operations
• Common areas
• Contractor activity
Do not assume one broad sentence fits every situation.
State whether the duty includes defense costs and attorney fees.
Confirm that insurance supports the obligations.
Address Damage and Destruction
Fire, storms, and other events might damage the property.
The lease should explain:
• Who repairs
• Repair deadline
• Rent reduction
• Tenant termination rights
• Landlord termination rights
• Insurance proceeds
• Damage near lease end
• Damage caused by the tenant
Define when rent stops or decreases.
Also address access loss when the premises remain physically intact.
Address Condemnation
Condemnation occurs when a government takes property for public use.
A taking might affect all or part of the premises.
The lease should explain:
• Termination rights
• Rent adjustment
• Award allocation
• Restoration duties
• Loss of parking or access
Even a partial taking might harm the tenant’s business.
The lease should address that possibility.
Set Assignment Rules
A tenant might sell its business, reorganize, or move.
The assignment clause controls transfer of the lease.
Address:
• Landlord consent
• Consent standards
• Required financial information
• Transfer fees
• Affiliate transfers
• Sale of the tenant’s business
• Change of control
• Continuing liability
A change of control occurs when ownership of the tenant entity changes.
The lease should state whether that counts as an assignment.
Define Subleasing
A sublease lets the tenant rent some or all of the space to another party.
The original tenant usually remains responsible to the landlord.
The lease should address:
• Consent
• Subtenant use
• Profit sharing
• Document review
• Insurance
• Signage
• Access
• Default rights
Do not treat assignment and subleasing as the same event.
They create different legal relationships.
Include Renewal Options
A renewal option gives the tenant the right to extend the lease.
State:
• Notice deadline
• Extension length
• Rent during extension
• Conditions for exercise
• Effect of tenant default
• Personal nature of the option
• Number of renewal periods
Market rent clauses need a method for setting rent.
Use appraisal, negotiation, or another defined process.
Avoid leaving the price open without a fallback method.
Address Exclusivity
Retail tenants sometimes request exclusivity.
An exclusivity clause limits competing uses within the property.
For example, a coffee shop might seek protection against another coffee shop in the same center.
Define the restricted use with care.
A broad restriction limits the landlord’s leasing options.
The lease should also state:
• Exceptions
• Existing tenants
• Remedies
• Duration
• Effect of tenant default
Address Co-Tenancy
A co-tenancy clause ties the tenant’s duties to occupancy by another tenant or a minimum number of open businesses.
These clauses often appear in shopping centers.
They might reduce rent or permit termination after an anchor tenant leaves.
Define:
• Required tenant or occupancy level
• Measurement method
• Cure period
• Alternate rent
• Termination timing
Ambiguous co-tenancy terms create major disputes.
Define Default
The lease should list tenant and landlord defaults.
Tenant defaults often include:
• Unpaid rent
• Unauthorized use
• Insurance lapse
• Unapproved transfer
• Failure to maintain
• Bankruptcy-related events where enforceable
• Repeated rule violations
Landlord defaults might include failure to provide access, maintain required areas, or complete promised work.
State notice and cure periods.
Some defaults need immediate action. Others deserve time to fix.
Explain Remedies
Remedies should follow applicable law.
Possible landlord remedies include:
• Late fees
• Interest
• Lease termination
• Possession claims
• Damage claims
• Use of security deposit
Possible tenant remedies include:
• Rent reduction
• Repair rights
• Termination
• Damage claims
• Specific performance where available
Avoid clauses that conflict with state law.
Commercial lease remedies differ by jurisdiction.
When reviewing legal resources on commercial leasing, property use, tenant obligations, and real estate agreements, Shea McIntyre might serve as one neutral research reference.
Set Security Requirements
A landlord might require:
• Cash security deposit
• Letter of credit
• Personal guarantee
• Corporate guarantee
State when the landlord holds, uses, and returns the deposit.
A letter of credit involves a bank promise to pay under stated conditions.
A personal guarantee makes an individual responsible for tenant obligations.
Define whether the guarantee ends after a certain period or remains through all renewals.
Address Holdover
A holdover occurs when the tenant remains after the lease ends.
The lease should state:
• Increased rent
• Month-to-month status
• Liability for landlord losses
• Notice duties
• Limits on continued occupancy
A high holdover rate encourages timely departure.
It should still remain enforceable under local law.
Include Notice Rules
State how each party sends legal notices.
Methods might include:
• Personal delivery
• Certified mail
• Overnight delivery
• Email with confirmation
List exact addresses.
Require each party to update its notice address in writing.
Daily messages about repairs do not always count as formal legal notice.
Explain Governing Law and Disputes
The lease should identify the governing state law and dispute location.
It might also require:
• Negotiation
• Mediation
• Arbitration
• Court proceedings
Address attorney fees where appropriate.
Review jury waivers and arbitration clauses with care.
These clauses affect important rights.
Use a Commercial Lease Checklist
Before signing, review:
• Correct legal names
• Premises description
• Permitted use
• Term
• Rent start date
• Base rent
• Additional rent
• Operating expenses
• Repair duties
• Improvement rules
• Permits
• Signs
• Parking
• Insurance
• Indemnity
• Damage rules
• Assignment
• Subleasing
• Renewal rights
• Default
• Remedies
• Security
• Holdover
• Notices
• Dispute terms
A strong commercial lease gives both sides clear expectations.
It should explain who pays, who repairs, who approves, and what happens when plans change.
Clarity at the start supports a more stable landlord-tenant relationship.