Terms to consider when negotiating a commercial real estate lease

On Behalf of | Dec 15, 2020 | Firm News |

There is no standard form to follow when it comes to commercial leases. It’s often assumed that terms will be negotiated before the parties agree to a lease.

Depending on the marketplace, a lease may primarily benefit the property owner or the person who is operating a business. Regardless of the economic circumstances, it’s important to think about the following terms when negotiating your lease.


Probably the most obvious yet arguably the most important term in any commercial lease agreement. You may be able to negotiate a term favorable to you or find yourself having to acquiesce more to the other party. Rent amounts are usually calculated by multiplying the space’s square footage by the cost per square foot. Other factors may also influence the rent amount — for example, maintenance costs of common areas.

You should also determine who will be responsible for the cost of utilities, taxes, repairs, and other costs associated with the property. In addition, negotiating annual rent increases should be part of your discussion.

Length of the lease

In most cases, landlords will give more concessions to tenants willing to enter into a long-term lease. However, a long-term lease may not always be desirable from a business owner’s perspective. Location and the needs of a business are important considerations.

Improvement costs

As a business evolves, the original space may no longer suit the company’s needs. Determining who will pay for improvements, or build-outs, is an important aspect of any lease agreement. Whether the space should return to its original condition when the lease expires is another important consideration.

Permitted use

The focus of a business can change over time. It might be necessary to use the commercial space for a reason other than its original intent. Permitted use terms should be somewhat flexible, without being so broad as to be meaningless or so restrictive that it impedes business growth.

Negotiating the terms of a commercial lease can be complicated. You should work with a skilled legal professional who can help you assert your interests when working toward a favorable agreement.