Commercial Lease Review Checklist for Tenants (Printable)

What does a commercial lease review checklist cover?

A good checklist follows the money and the exits. It asks what you will pay in total, what can make that number grow, who is personally on the hook, and how you get out if the business changes. Around those questions sit the operating details that cause day to day disputes: repairs, insurance, signage, hours, access and compliance with building codes and accessibility law.

The checklist below is split into five parts. Work through them in order, because later answers depend on earlier ones. You cannot judge a cap on operating costs until you know which lease structure you have, and you cannot judge the guaranty until you know how fast the landlord can declare a default. If a question has no answer in the document, write "silent" next to it. Silence usually favors the party who drafted the lease, which is the landlord.

Before you start: what documents should you gather?

Reviewing only the main lease body is the most common mistake. Key terms often sit in exhibits, rules and side documents that are incorporated by reference. Gather all of these before you begin:

• The full lease with every exhibit: floor plan, work letter, rules and regulations, sign criteria and any exclusive use schedule.
• The personal guaranty, if there is one, as a separate document. It is often shorter than the lease and far more important to you personally.
• The signed letter of intent, so you can confirm that every agreed business term made it into the lease.
• The landlord's last two or three years of actual operating expense reconciliations and the current property tax bill.
• Any recorded documents the landlord's lender may require you to sign later, such as a subordination, non-disturbance and attornment agreement (SNDA) or an estoppel certificate form.
• Local zoning information confirming your intended use is allowed at the address, and any permits your build-out will need.

Part 1: space, use and term

• Is the premises described by suite number and a floor plan, and does the lease state both rentable and usable square feet? Rent and cost shares are usually based on rentable area, which includes a share of common space.
• Can the square footage be remeasured later, and if so, can rent go up as a result? Ask that any remeasurement only reduce rent, never increase it.
• Is the permitted use clause broad enough for your business today and the services you may add later? A narrow use clause can block a future buyer.
• Does the lease give you an exclusive use right for your main line of business, if you are in a multi-tenant center?
• When does the term start: on signing, on delivery of the space or on opening? Is there a rent free period for build-out, and what happens if the landlord delivers late?
• Is the space delivered "as is," or does the landlord warrant that the roof, structure and building systems are in good working order at delivery?
• Are parking, signage, after-hours access and loading rights written into the lease, not just promised in conversation?

Part 2: rent, escalations and pass-through costs

This part answers the question every tenant should be able to state in one sentence: what will this space cost over the full term, including renewals?

• What is the base rent for each year of the term, in dollars, after every escalation? Ask for a rent schedule rather than a formula.
• Is the lease gross, modified gross or triple net, and what exactly do you pay on top of base rent?
• How are common area maintenance (CAM) and operating expenses defined, and is there a written list of exclusions such as capital improvements, leasing commissions and the landlord's financing costs?
• Is there a cap on increases in controllable expenses, and is it cumulative or non-cumulative?
• Is there a management or administrative fee on top of operating costs, and is it capped as a percentage?
• When must the landlord deliver the annual reconciliation, and do you have a right to audit the landlord's records?
• Are there late fees, interest on late payments or charges for after-hours heating and cooling, and are the amounts reasonable?
• How large is the security deposit, when is it returned, and can it be reduced after a period of on-time payment?

Part 3: guaranty, default and remedies

• Is anyone signing a personal guarantee? If so, is it unlimited, capped at a dollar amount, reduced over time (burn-off) or limited to rent through the date you leave (a good guy guarantee)?
• Does the guaranty automatically cover future amendments, extensions and renewals without the guarantor signing them?
• How many days do you have to cure a missed payment, and does the landlord have to send written notice first?
• How long do you have to fix non-monetary defaults, and can that period extend if the fix reasonably takes longer?
• Does the lease allow rent acceleration, making all remaining rent due at once after a default?
• Does the landlord take a lien or security interest in your equipment, inventory or fixtures?
• Does the lease say who pays legal fees in a dispute, and does that clause work both ways?
• Does the lease require the landlord to try to re-let the space if you leave early, or does it waive that duty where state law allows a waiver?

Part 4: exit, assignment and renewal

• Can you assign the lease or sublet the space, and is landlord consent "not to be unreasonably withheld"?
• Is a sale of your business, or a transfer of ownership interests in your company, treated as an assignment that needs consent?
• Does the landlord have a recapture right, letting it terminate your lease instead of approving a sublease or assignment?
• When you assign with consent, are you and any guarantor released from future liability?
• Is there a renewal option? What is the deadline to exercise it, how must notice be sent and how is renewal rent set?
• Is there an early termination right, a relocation right for the landlord, or a co-tenancy clause that reduces rent if anchor tenants leave?
• What must you remove or restore at the end of the term, and what happens if you stay past the end date (holdover rent)?

Part 5: repairs, insurance, compliance and lender documents

Operating clauses look like boilerplate, but they decide who pays for the expensive surprises. The Americans with Disabilities Act is a good example. Under the federal regulation at 28 CFR 36.201(b), both the landlord who owns a building with a place of public accommodation and the tenant who operates it are covered, and the lease may divide compliance responsibility between them, but only as between the two parties. A customer can still bring a claim against either one. Read the compliance clause with that in mind.

• Who repairs and who replaces the roof, structure, parking lot and heating and cooling equipment? Repair and replacement are different obligations.
• Who pays for code and accessibility work, including work triggered by your own alterations?
• What insurance must you carry, in what amounts, and do both sides waive claims against each other to the extent covered by insurance (a mutual waiver of subrogation)?
• What happens after a fire or casualty? Does rent stop while the space is unusable, and can you terminate if rebuilding takes too long?
• Do you have to sign an SNDA, and does the lender promise not to disturb your tenancy if it forecloses while you are not in default?
• How many days do you have to return an estoppel certificate, and can you correct inaccurate statements in it?

Which checklist items matter most for your type of business?

Every item on the list matters, but the order of priority changes with the business. A restaurant lives or dies on utilities and exhaust; an office tenant cares more about operating expense creep and after-hours charges. Use this table to decide where to spend your negotiating time first.

How do you use the commercial lease review checklist to negotiate?

Once every item has an answer or a "silent" mark, rank the problems by cost. A clause that could cost you a year of rent outranks one that could cost a few hundred dollars. Then send the landlord one written list of requested changes, with a short business reason for each. Landlords respond better to a single organized request than to a stream of objections, and the reasons give a leasing agent something to take to the owner.

Timing matters too. Most leverage exists before you sign the letter of intent, because that is when the landlord is still competing for you. If you have not reached that stage yet, put the big items, such as the guaranty shape, the CAM cap and the renewal option, into the letter itself. Our free commercial lease letter of intent template has space for each of them.

An automated review can speed up the first pass. The Commercial Lease analyzer reads the whole lease with its exhibits, totals base rent with escalations over the term, lays out the key dates, and flags the guaranty, CAM, assignment and default terms against the items above, quoting the clause and page for each finding. For a lease you will personally guarantee, a short review by a commercial real estate lawyer in your state is still worth the fee. This guide is general information, not legal advice.