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Five Things to Check Before Signing a Commercial Lease

A lease is usually one of a small business’s biggest long-term commitments. These five areas cause the most trouble.

1. Personal guarantee

Many landlords ask the owner to guarantee the lease personally. Try to cap the amount, limit the time, or replace the guarantee with a larger security deposit.

2. Term and renewal rights

Check how long you are committed and whether you have a right to renew, and at what rent. Without a renewal option, the landlord can change the deal when your term ends.

3. Rent increases and operating expenses

Look for annual escalations and for charges beyond base rent, such as shared building costs, taxes, and insurance. These add up quickly.

4. Repairs, build-out, and use

Know who pays for repairs and improvements, who owns what you build, and what business uses the lease allows.

5. Assignment and exit

Find out whether you can sublease or transfer the lease if you sell the business or need to leave, and what happens if you default.

When to call a lawyer: Call a lawyer when you have a letter of intent or draft lease, before you sign anything binding.

This guide is general information, not legal advice for your situation.

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