What Does a Commercial Lease Lawyer Look For During a Lease Review?
- Aug 16, 2023
- 4 min read
Many business owners believe a commercial lease review simply involves reading the lease to ensure everything "looks okay." In reality, a professional commercial lease review is a comprehensive legal and risk assessment designed to identify provisions that may expose your business to unnecessary financial, operational, and legal risk.
Commercial leases are rarely standard agreements. Most are drafted by or on behalf of the landlord, with the goal of protecting the landlord's interests. While that is understandable, it also means tenants should carefully review the agreement before signing.
A commercial lease may govern your business for five, ten, or even twenty years. A single overlooked clause can cost significantly more than the cost of having the agreement reviewed.
Why a Commercial Lease Review Is Important
Your lease is much more than a document that sets out monthly rent.
It establishes the legal framework for your relationship with the landlord and determines:
• Your financial obligations
• Your operational flexibility
• Your liability exposure
• Your renewal rights
• Your ability to expand, relocate, or sell your business
Many lease provisions only become important when something goes wrong. By then, it is often too late to negotiate better terms.
A commercial lease review helps identify those issues before you become legally bound.
What Does a Commercial Lease Lawyer Actually Review?
Every lease is different, but a thorough review generally focuses on identifying legal risk, hidden costs, and opportunities to negotiate more favorable terms.
Below are some of the most important provisions reviewed.
Rent and Rent Escalation
Many tenants focus only on the starting rent.
A lawyer will review:
• Base rent
• Rent escalation clauses
• Fixed versus market rent adjustments
• Consumer Price Index adjustments
• Rent increase caps
Understanding how rent changes over the life of the lease is essential for long-term budgeting.
Additional Rent and Operating Costs
One of the most common surprises in commercial leasing involves additional rent.
A lawyer will determine whether you may be responsible for costs such as:
• Property taxes
• Common area maintenance expenses
• Building insurance
• Property management fees
• Utilities
• Capital expenditures
These expenses can significantly increase the overall cost of occupancy.
Personal Guarantees
Many business owners incorporate to protect their personal assets.
However, a personal guarantee may require the owner to become personally responsible for lease obligations.
During a lease review, a lawyer will assess:
• Whether a personal guarantee is required
• Whether liability can be limited
• Whether the guarantee can expire after a period of successful tenancy
• Whether alternative security arrangements may be negotiated
Repair and Maintenance Obligations
Commercial leases frequently shift maintenance responsibilities to tenants.
A lawyer will determine who is responsible for:
• HVAC systems
• Plumbing
• Electrical systems
• Structural repairs
• Roof repairs
• Common areas
Understanding these obligations can help prevent significant unexpected expenses.
Renewal Rights
Renewal clauses are among the most valuable provisions in a commercial lease.
A review includes:
• Renewal deadlines
• Number of renewal options
• Rent calculation during renewal
• Conditions that may affect renewal rights
Strong renewal rights help protect the value of your business and your investment in the premises.
Assignment and Subleasing
Business needs change.
You may eventually wish to:
• Sell the business
• Relocate
• Downsize
• Bring in another operator
A lawyer reviews whether the lease provides sufficient flexibility through assignment or subleasing rights.
Default and Termination Clauses
A lease review also examines what happens if problems arise.
Important questions include:
• How much notice must be given?
• Is there an opportunity to correct a default?
• Can the landlord terminate immediately?
• What remedies are available?
Understanding these provisions before signing reduces future risk.
Insurance and Indemnity Provisions
Insurance obligations are often broader than business owners expect.
A lawyer will review:
• Required insurance coverage
• Indemnity obligations
• Liability allocation
• Risk transfer provisions
These clauses can significantly affect financial exposure if an incident occurs.
Clauses That May Be Negotiated
Many business owners believe commercial leases are non-negotiable.
In reality, many provisions can often be revised before signing.
Examples include:
• Rent increase provisions
• Additional rent obligations
• Personal guarantees
• Repair responsibilities
• Renewal rights
• Assignment rights
• Default provisions
Negotiating these terms before signing is almost always easier than trying to change them later.
Why Business Owners Should Not Rely on Templates or Assumptions
Every business is different.
A restaurant, medical clinic, retail store, warehouse, and professional office each face different operational risks.
A commercial lease review should consider how the lease affects your specific business rather than relying on generic assumptions.
The goal is not simply to explain the lease. The goal is to identify legal risks, negotiate better terms where possible, and ensure the agreement supports your long-term business objectives.
A Commercial Lease Review Is an Investment, Not an Expense
Many business owners hesitate to have a lease reviewed because they view it as an additional cost.
In reality, a lease review often identifies issues that can save significantly more than the legal fee.
Negotiating one unfavorable clause before signing can result in substantial savings over the life of the lease.
More importantly, it provides confidence that you understand the agreement before committing your business.
Book a Consultation
If you have been presented with a commercial lease, renewal agreement, amendment, or offer to lease, you can Book a Consultation before signing.
During a commercial lease review, we assess the agreement from a legal and business perspective, identify potential risks, explain complex provisions in plain language, and advise on opportunities to negotiate more favorable terms. Our goal is to help you make an informed decision and protect your business before you become legally bound by the lease.
